How to choose a QSEHRA administrator for your small business

In this article:

• Why QSEHRA administration software is important

• What is a QSEHRA and who benefits from it?

• What is a QSEHRA plan administrator?
• Why you can't administer a QSEHRA yourself
• How to choose a QSEHRA administrator
• Getting started with a QSEHRA administrator
• Making QSEHRA work for your business
• Partner with Take Command for seamless QSEHRA administration
• FAQs

Why QSEHRA administration software is important

For small businesses, health benefits represent a significant challenge. Traditional group insurance premiums have increased at rates that consistently outpace inflation, with small businesses facing particularly steep increases. According to the Kaiser Family Foundation, annual premiums for employer-sponsored family health coverage reached $26,993 in 2025, 6% higher than in 2024.¹ For 2026, small group insurers are proposing median premium increases of 11%.²

For small employers with fewer than 50 employees, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) offers a fundamentally different approach. Instead of purchasing expensive group coverage with unpredictable annual renewals, you set a fixed monthly allowance that employees use to purchase individual health insurance plans that meet their needs. Your costs stay predictable, your employees get choice, and you avoid the participation requirements and claims volatility that make traditional group plans so challenging for small businesses.

That predictability and control comes with a trade-off: QSEHRA requires specialized administration. Between HIPAA privacy rules, IRS reporting obligations, and the practical complexities of reimbursement processing, attempting to manage a QSEHRA internally creates significant legal and financial exposure while consuming hours of your time each month. This is where choosing the right QSEHRA administration software becomes essential. The right platform handles all the complexity so you can offer competitive health benefits without the administrative burden or compliance risk. This guide walks you through everything you need to know to select an administrator that makes QSEHRA work for your small business.

What is a QSEHRA and who benefits from it?

Before diving into administration, it helps to understand what makes QSEHRA attractive for small businesses in the first place.

A QSEHRA allows employers with fewer than 50 full-time employees to reimburse workers tax-free for individual health insurance premiums and qualified medical expenses. You decide how much to contribute each month, employees purchase their own coverage on the individual marketplace, and you reimburse them for their premiums up to your set allowance. The reimbursements are tax-deductible for your business and tax-free for employees.

QSEHRA works particularly well for small businesses facing steep group insurance renewals, companies with diverse workforces, employers with high turnover, businesses with employees spread across multiple states, and companies that want budget predictability without sacrificing competitive benefits. Unlike traditional group insurance where participation requirements and claims experience drive unpredictable premium increases, QSEHRA gives you complete cost control from day one.

The defined contribution model means you know exactly what health benefits will cost this year and next year. There are no surprise 30% renewal increases, no participation minimums to maintain, and no claims volatility threatening your budget. Employees appreciate the flexibility to choose plans that include their doctors and meet their family's specific needs rather than being forced into a group plan that may not work for them.

What is a QSEHRA plan administrator?

A QSEHRA plan administrator is the software platform and service provider that manages the legal, compliance, and operational aspects of your employee health reimbursement arrangement. Think of it as the infrastructure that transforms QSEHRA from a complex tax code provision into a functioning employee benefit.

The administrator handles three critical areas:

• Manages all compliance requirements including HIPAA privacy protections, IRS reporting obligations, and legal plan document creation and maintenance.

• Supports your employees through selecting individual health insurance and submitting reimbursement requests.

• Provides you with tools to manage the program efficiently without consuming hours of your time each month.

According to Take Command data from 2025, 84% of clients spend less than an hour each month administering their HRA when using a quality administrator platform.³ This minimal time investment is possible because the administrator automates compliance tracking, employee communications, coverage verification, and reimbursement processing. What would otherwise require dozens of hours monthly plus significant legal expertise becomes a simple review and approval workflow.

Why you can't administer a QSEHRA yourself

We hear this question frequently: can I just administer a QSEHRA myself and save the administrator fees? While it's technically possible, it's rarely advisable. The combination of privacy concerns, paperwork requirements, and HIPAA compliance makes self-administration impractical for most small businesses.

Privacy concerns create uncomfortable situations. The nature of QSEHRA means you're dealing with private health information when processing reimbursements for qualified medical expenses. Most employees prefer to keep their healthcare decisions private from their direct supervisor or business owner. A third-party administrator provides that essential privacy buffer while still giving you visibility into program costs and participation.

Paperwork becomes overwhelming quickly. Keeping up with medical receipts, insurance documentation, and reimbursement records is time-consuming even for a small team. Maintaining all of this in a secure, HIPAA-compliant manner requires systems and processes that most small businesses simply don't have in place. The administrative burden compounds as your team grows and as questions multiply during enrollment periods. What seems manageable for three employees becomes chaotic at ten and unworkable at twenty-five.

HIPAA compliance isn't optional and penalties are severe. This is where many small business owners get tripped up. Because QSEHRAs are designed for companies with fewer than 50 employees, there's a common misconception that federal health plan regulations don't apply. That's incorrect. While small business HRAs don't fall under every federal law affecting larger corporations, HIPAA absolutely applies. All health plans, including those reimbursed through a QSEHRA, must observe the HIPAA Privacy Rule regardless of company size.⁴

This rule protects patients' personal health information, including documentation, emails, and communications regarding an individual's health. We're talking about bills from doctor visits, MRI scan results, lab work, prescription records, and everything else related to medical care. Civil penalties for HIPAA violations range from $100 to $50,000 per incident for violations due to reasonable cause. More serious violations classified as willful neglect can result in up to $250,000 in fines and 10 years in prison, particularly if information was taken under false pretenses or disclosed intentionally. State laws may impose additional penalties on top of federal consequences.

Even if you didn't intend for noncompliance to occur or it was completely accidental, you're still liable. The cost of a quality QSEHRA administration platform is a fraction of what you'd pay in time, stress, potential penalties, and the awkwardness of reviewing your employees' medical information. The bottom line is straightforward. Avoid the risk entirely and work with a QSEHRA administrator that keeps you compliant and protected.

How to choose a QSEHRA administrator

Not all QSEHRA administrators offer the same level of service or protection. Selecting the right administrator shapes your entire benefits experience and determines whether offering this benefit creates value or headaches. When you work with a quality QSEHRA plan administrator like Take Command, you experience less stress, more freedom to focus on your business, and happier employees who actually understand and appreciate their health benefits.

Compliance automation and legal protection. Your administrator should handle compliance so thoroughly that you never worry about penalties or missed deadlines. Look for:

• Automatic generation and maintenance of all required legal documents with HIPAA-compliant language that updates when regulations change

• Verification that employees have Minimum Essential Coverage

• Proactive tracking of all IRS deadlines

• Filing of Form 720 for the Patient-Centered Outcomes Research Trust Fund fee

• Accurate year-end W-2 reporting

Ask specifically how they handle regulatory updates, what happens when rules change mid-year, and how they support clients during audits. If you're spending more than an hour a month on QSEHRA administration, either your administrator isn't doing their job or you need a better platform.

Employee support and education. The best administrators provide licensed health insurance professionals who help employees shop for coverage, not just process paperwork. Look for:

• Educational materials that explain how to get the most value from the HRA in plain language

• Robust onboarding processes that set proper expectations from day one

• Ongoing support throughout the year for questions and life changes (not just during enrollment)

• Mobile-friendly platforms that make submitting reimbursements genuinely easy

Request a demo of the employee experience, not just the employer portal. When employees have access to licensed professionals who can help them optimize their QSEHRA reimbursements and select the right coverage, adoption and satisfaction rates increase dramatically.

Employer tools that minimize your workload. You need a quick online signup process and an intuitive admin portal that gives you real control and visibility. Your portal should let you:

• Review and approve HRA documents

• View monthly reimbursement reports showing exactly what was claimed and paid

• Easily add or remove employees as your team changes

• Manage subscriptions and billing

• Access onboarding videos, tax forms, and sample employee communications

Ask about typical monthly time investment and what tasks require your attention versus what happens automatically. If an administrator can't clearly explain how they'll save you time, that's a red flag.

Integrated health insurance support. Some administrators, like Take Command, also operate as licensed health insurance brokers. This dual capability means your employees get professional help not just with reimbursement administration but with actually shopping for and enrolling in the right individual plans. This integration dramatically improves employee experience, reduces confusion during enrollment, and ensures employees maximize the value of their QSEHRA allowance by selecting appropriate coverage.

Transparent pricing with real value. Understand the complete fee structure including setup costs, monthly fees, what services are included versus additional charges, and how pricing changes as you grow.

Getting started with a QSEHRA administrator

Once you've selected your administrator, implementation should feel supportive rather than overwhelming.

Initial planning. Your administrator will guide you through your QSEHRA set up including setting monthly reimbursement amounts, determining which expenses to reimburse beyond premiums, choosing whether to include part-time employees, setting waiting periods for new hires, and selecting your effective date. A quality administrator provides recommendations based on what works for similar businesses.

Documentation and communication. Your administrator automatically generates all required legal documents with HIPAA-compliant language, incorporates your specific plan design, and provides executed documents for your records. They also supply ready-to-use employee communication materials including announcement letters, educational flyers, FAQ documents, and marketplace shopping guidance. Many will conduct live enrollment meetings for your team.

Ongoing operations. Once launched, the program settles into a simple monthly routine: employees submit reimbursement requests, you review and approve through your portal in minutes, the administrator processes payments and maintains compliance automatically, and you receive regular reports on program performance.

Making QSEHRA work for your business

QSEHRA gives small businesses a powerful tool for controlling health benefit costs while maintaining competitive employee offerings. The defined contribution model provides budget predictability that traditional group insurance simply can't match, especially in an environment where small group premiums are increasing 11% or more annually. Employees gain choice and flexibility in selecting coverage that meets their specific needs rather than settling for whatever group plan the company can afford.

The key to success is proper administration. The compliance requirements are real and the consequences of mistakes are serious. The employee experience depends heavily on the quality of support and education provided. This is why choosing the right QSEHRA administrator matters so much. 

For small businesses competing for talent against larger companies with sophisticated HR departments, professional QSEHRA administration levels the playing field. Your employees get the support and guidance they deserve. You get predictable costs and minimal administrative burden. That combination is increasingly valuable as traditional group insurance becomes less affordable and less flexible for small employers.

Partner with Take Command for seamless QSEHRA administration

Take Command is a leader in QSEHRA administration and small business HRA tax strategy. As the only QSEHRA administrator that also offers individual health plans, we provide complete support for both you and your employees throughout the entire benefits experience.

When you partner with Take Command, our small business experts take care of the details so you can focus on running your business. You get to offer your employees the healthcare benefits they deserve without the stress, compliance risk, or time investment of managing it yourself.

Ready to get started? Contact Take Command to explore how QSEHRA administration could work for your business.

FAQs

What's the difference between a QSEHRA and an ICHRA?

QSEHRA is designed specifically for small businesses with fewer than 50 employees and has annual contribution limits set by the IRS ($6,350 for individual coverage and $12,800 for family coverage in 2025). ICHRA has no size restrictions and no contribution limits, making it suitable for larger employers who want more flexibility in what they offer. Both allow tax-free reimbursement of individual health insurance premiums, but QSEHRA is simpler to set up and ideal for small businesses looking for straightforward benefits administration.

Do QSEHRA administrators work with employees in all 50 states?

Quality QSEHRA administrators support employees nationwide and understand the individual health insurance marketplace in each state. Since individual plan options, carrier availability, and costs vary significantly by location, look for administrators with licensed insurance professionals who can guide employees through their specific state's marketplace. This geographic expertise is particularly important if you have remote workers or multiple office locations.

What happens if an employee leaves my company mid-year?

Your QSEHRA administrator handles the offboarding process, ensuring proper documentation and final reimbursements. When an employee leaves, their QSEHRA reimbursements stop, but they keep their individual health insurance plan (they just start paying the full premium themselves). Your administrator will generate the necessary tax documents for the departing employee and remove them from your active roster.

How long does it take to implement QSEHRA with an administrator?

Implementation typically takes 2-4 weeks from your initial decision to employees being able to submit reimbursements. This includes plan document creation, employer onboarding, employee communications and education, and platform setup. The timeline may be longer if you're implementing during a busy enrollment season, so it's best to start the process at least 2-3 months before your desired effective date.

References

1. Kaiser Family Foundation. (2025). 2025 Employer Health Benefits Survey. Retrieved from https://www.kff.org/health-costs/report/2025-employer-health-benefits-survey/

2. Kaiser Family Foundation. (2025). 2026 Small Group Health Insurance Rate Filings Analysis. Retrieved from https://www.kff.org/

3. Take Command Health. (2025). Internal client survey data on QSEHRA administration time requirements.

4. U.S. Department of Health and Human Services. (1996). Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule. Retrieved from https://www.hhs.gov/hipaa/for-professionals/privacy/index.html

5. Internal Revenue Service. (2025). Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act. Retrieved from https://www.irs.gov/affordable-care-act/employers/questions-and-answers-on-employer-shared-responsibility-provisions-under-the-affordable-care-act