What’s the difference between Individual Coverage Health Reimbursement Arrangement and Qualified Small Employer Health Reimbursement Arrangement? We're glad you asked. Both are tax-advantaged tools to consider when searching for a small business health insurance solution for your company.
Nov. 4, 2020: This post has been updated with 2021 QSEHRA limits!
Now that we’ve spent a couple of years learning the ins and outs of QSEHRA as both an individual broker and a market leader for QSEHRA administration, it’s time to learn another weird acronym and the fun new guidelines and regulations that accompany it. As a refresher, ICHRA is one of the new HRA options passed by the departments of Treasury, Labor, and Health & Human Services. The options are in response to an executive order from President Trump to increase availability and flexibility of HRAs.
For those familiar with Qualified Small Employer Health Reimbursement Arrangements (QSEHRA), they are an awesome, tax-advantaged strategy for small businesses to afford personalized health benefits for their team.
Now that there's a new type of HRA on the table - the ICHRA - we thought it would be helpful to go over the differences in the two. We believe that ICHRA will address some of the limitations that QSEHRA faced in terms of how employee classes were divided, eligibility, and the role premium tax credits play.
Here's what you need to know!
QSEHRA vs. ICHRA
Below are some of the general differences we’ve found so far between the two HRAs.
|QSEHRA||Individual Coverage HRA|
|Business size||Fewer than 50 full-time employees may participate||Any business of any size may participate|
|Can it be offered with a group plan?||No||Yes, however the business cannot offer both the group policy and the HRA to the same employee class.|
|Is there a maximum contribution amount?||In 2021, maximum annual allowance amounts are set at $5,300 for single employees and $10,700 for employees with a family.||ICHRAs don’t cap out their annual allowance amounts.|
|Can amounts vary per employee?||Employer can vary allowance amounts by family status, age, and family size, they cannot vary based on employee classes.||A business can adjust allowance amounts according to different employee classes, as well as age and family size.|
|Who is eligible?||All full-time employees are eligible. The employer may include part-time employees, but the HRA must be offered on the same terms.||The business determines the eligibility guidelines according to each employee class set ahead of time, but the HRA must be offered on the same terms to all employees in each class.|
|How does it work with premium tax credits?||Employees participating in the QSEHRA plan can still receive premium tax credits, but the amount you receive is reduced from the HRA allowance.||Employees participating in the ICHRA plan aren’t eligible for premium tax credits.|
|Do you have to have health insurance to participate?||Employees must have an individual health plan that meets MEC requirements to participate.||Employees must have individual health insurance to participate in the HRA.|
What comes next
We are excited to see more flexibility infused into the HRA world that will help small business like us (and our clients!) afford health benefits for employees.
Is your company or client going to be a part of this exciting change? Chat with our team with any questions you may have about these new, tax-friendly benefits or check out our HRA comparison chart or our new ICHRA Guide for more information on its background, setup process, requirements, and rules.