Looking for information on QSEHRA and COBRA? Typically, when an employer offers a group health plan the employer and employee split the cost of maintaining the plan each month. When an employee becomes COBRA eligible under these plans, the employee will pay the full price of the medical plan out of pocket (both the employer + employee portion) in order to maintain the coverage.
But what if you have an HRA? Specifically, what about a small business HRA?
What is a QSEHRA?
QSEHRA stands for “Qualified Small Employer Health Reimbursement Arrangement”. It is sometimes called a Small Business HRA. We like to call it just QSHERA (“Q-Sarah”). In summary, QSEHRA allows small employers with fewer than 50 full-time employees to reimburse employees tax-free for individual insurance premiums and medical expenses. QSEHRA contribution limits for 2020 are $5,250 a year for an individual or $10,600 for a family per year.
What is COBRA?
COBRA is the Consolidated Omnibus Budget Reconciliation Act of 1985, federal legislation that allows you – if you work for an insured employer group of 20 or more employees – to continue to purchase health insurance for up to 18 months if you lose your job, or your employer-sponsored coverage is otherwise terminated (in some situations, coverage can continue for up to 36 months).
Since a QSEHRA is not a group plan, COBRA does not apply.
However, since a QSEHRA requires employees to secure their own health plan in order to participate and receive reimbursement through the HRA, that insurance plan is owned by the employee and therefore portable.
There are different rules that apply to different HRAs. For instance, the individual coverage HRA (ICHRA) requires employees to secure their own health plan in order to participate and receive reimbursement through the HRA.
What are the COBRA requirements for ICHRA?
Employers with 20 or more employees are required under COBRA to offer continuation of coverage to employees and their dependents when they lose coverage as a result of a qualifying event, such as an employee’s death, divorce, or job loss. COBRA is generally offered for 18 months but can be extended for an additional 18 months for subsequent qualifying events (for example, coverage could be extended for family members of a former employee who dies while covered by COBRA). Check out our article on COBRA and ICHRA for more helpful information on how COBRA is calculated for ICHRA.
Take Command Health is a recognized leader in QSEHRA administration and small business HRA tax strategy. Chat with our team with any questions you may have about HRA tax-friendly benefits or check out our awesome QSEHRA FAQ database or our QSEHRA guide for more information on its background, requirements, and rules.