Looking for an alternative to a group health insurance plan for your nonprofit employees? A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) may be just what you are looking for when it comes to health insurance for nonprofits.
QSEHRAs are increasing in popularity among nonprofits as group plans become more expensive.
It's one way nonprofits can offer flexible and cost-effective benefits to their employees and provide a way for nonprofits to take care of their employees.
Affordable health insurance for non-profits
The most important thing about QSEHRA is that it allows nonprofits to reimburse employees tax-free for individual health insurance premiums and medical expenses.
This is a big deal because nonprofits can now get the same favorable tax treatment as big company group health plans but with a lot less hassle.
It also enables nonprofits to adopt a strategy called "defined contribution" which is much simpler than hassling with a one-size-fits all group plan and is proven to be much more efficient, affordable, and predictable.
Nonprofits can now give their employees a fixed dollar amount each month, say $200, and each employee can then shop for the plan that fits his or her needs the best.
Sally can choose a Blue Cross plan for her doctor, Roger can get Aetna to cover his prescription, and Betty can stay on her husband's group plan.
Gone are the days of comparing quotes from each insurance company or the headache of trying to get everyone what they want without breaking the budget!
And employees end up happier too.
Defined contribution health benefits allow nonprofits complete control over the costs of the health benefits, creating predictability with the health benefits budget.
For example, with defined contribution health benefits:
- There are no minimum amounts to contribute (the nonprofit decides the amounts of the defined contribution allowances).
- Costs are not incurred until employees receive reimbursement
- Pre-funding accounts are not required
- Unused funds stay with the nonprofit
Do you qualify?
In order to participate in the Qualified Small Employer HRA, the following criteria need to be met.
- The nonprofit must have fewer than 50 full time employees
- Cannot be combined with a group health plan
- Employees use the HRA to reimburse health insurance premiums and other out-of-pocket medical expenses tax-free.
- There are no minimum contributions to participate in QSEHRA. Annual contributions are capped at $4,950 for a single employee and $10,000 for an employee with a family. HRAs are 100 percent company funded and employee contributions are not allowed.
- Employees participating in an HRA are required to have minimum essential coverage to receive reimbursements.
- Employees may access premium tax credits. However, if an employee is eligible for a premium tax credit, the amount of the credit will be reduced by the monthly HRA amount.
- Generally, the nonprofit must make the same HRA contributions for all eligible employees. However, amounts may be varied based on family status or employment status such as full-time or part-time staff.
Want to learn more about QSEHRAs for nonprofits?
Does all of this sound complicated? Expensive? Here's some good news. With our help, this can be easy! Our new platform will handle all the accounting and legal legwork for the QSEHRA, take care of onboarding each of your employees, and make tax time easy and painless. You'll never have to hassle with receipts or worry about setting up a health plan again.
Have questions? Chat with our team online or check out these helpful resources!
- QSEHRA Guide
- QSEHRA Reimbursement Guide
- QSEHRA FAQs
- QSEHRA Plan Designer Tool
- QSEHRA Tax Savings Calculator
I wrote this blog because I love helping people decode confusing insurance jargon and understand the fine print. I'm a licensed health insurance professional and specialize in simplifying health insurance for individuals and small businesses. My QSEHRA articles have been featured regularly on Accounting Today, Accounting Web, HRWeb, and other industry publications. I'm also a member of Take Command Health's client success team and a full-time mom. Learn more about me and connect with me on our about us page. Thanks!