Are you thinking about setting up a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) for your business? Get excited because the benefits of QSEHRA are substantial!
QSEHRAs are a way for employers to reimburse employees for health and medical expenses with funds that are not taxed. This flexibility allows employees to find individual health care plans that best fit the unique medical needs of them and their families. Because employees are required to find their own health care plan, employers aren’t faced with trying to choose health care coverage that never quite checks all the boxes.
How exactly do QSEHRA reimbursements work?
Feel free to check out this article for more in depth instructions, but here is a brief overview:
- Choose your start date. It’s that easy. Choose the date you wish to have your QSEHRA plan start.
- Cancel existing group plan. Because you can’t offer a group health care plan and a QSEHRA simultaneously, you need to cancel any existing group health care plan.
- Confirm employee eligibility. Determine who will be eligible to participate in your plan.
- Determine your budget. First, identify QSEHRA reimbursement limits for 2023. Then, determine what the reimbursement limits will be for your plan.
- Establish QSEHRA plan documents. Legal documentation and the IRS go hand in hand. Fill out legal documentation outlining your plan. For more detailed information about QSEHRA plan documents, check out this helpful article.
- Introduce employees to your new plan. Share your new plan with your employees. Walk them through their benefits and the onboarding process. For more guidance on QSEHRA employee notice suggestions, read this article.
- Provide support to employees. Walk your employees through submitting their QSEHRA reimbursement requests. This is the best part so you want to make sure they understand how to take advantage of their benefits.
Because QSEHRAs are regulated by the IRS, it’s important to make sure you’re staying up to date with new policies, reimbursement limits, and eligible expenses. We’ll lay it all out below, but if you need help answering specific questions, don’t hesitate to reach out!
Let’s start with the basics. What is a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)? A QSEHRA is a relatively new (and incredibly beneficial) type of Health Reimbursement Arrangement (HRA) for employers to offer health benefits to their employees. QSEHRAs allow employers to allocate pre-taxed funds for their employees to use on eligible health-related expenses through reimbursements.
It’s super simple:
- Employers design their own plan and set reimbursement limits that best fit their budget
- Employees pay for their own health insurance and medical expenses
- Employees submit reimbursement requests and provide proof of the expenses
- Employers reimburse employees up to the predetermined limit
Now, if you’ve heard of a QSEHRA, you’ve probably also heard of an Individual Coverage Health Reimbursement Arrangement (ICHRA). To clear up any confusion, let’s review some key differences:
QSEHRA (Qualified Small Employer Health Reimbursement Arrangement)
- Designed for companies with less than 50 employees
- Requires minimum essential coverage (MEC)
- Major medical plans
- Student insurance
- Your spouse’s plan
- Government plans
- Dental and vision insurance
- Limited benefit plan
ICHRA (Individual Coverage Health Reimbursement Arrangement)
- No company size limitations of reimbursement limits
- Requires employees sign up for their own health care plan
- Major medical plans
- Catastrophic plans
- Student health insurance
How to set up your QSEHRA
If you think you may be eligible to participate in a QSEHRA, we’d love to hear from you! While it’s (somewhat) possible to administer your own QSEHRA in house, we highly recommend you check out some reputable QSEHRA software administrators (like Take Command) to make sure you’re covering all your bases.
QSEHRA eligible expenses
One of the biggest questions we get asked is, “What can QSEHRA funds be used for?” You may be surprised! Keep in mind that QSEHRA limits are determined (within IRS guidelines) by an employer. The pre-taxed funds that get to be utilized by employees are completely funded by their employer based on their own approved budget. As a result, QSEHRA plans will look different from employer to employer.
Each year, the IRS publishes a comprehensive list of approved expenses that can be submitted for reimbursement through a QSEHRA.
In general, employees can use their QSEHRA funds for:
- Doctor visits
- Medical equipment
- Dental procedures
Bonus: over the counter medications are now considered a QSEHRA eligible expense thanks to the Cares Act!
In addition, employees can use their approved funds to cover the costs of their own individual health care plans. Regardless of how your employees choose to use their funds, make sure they have a good understanding of eligible expenses. You want them to take advantage of their entire benefit and max out their funds each month. It’s helpful to have resources available for your employees to access so they get the most up to date information regarding their eligible expenses.
Still have more questions about your unique health care needs? Reach out to Take Command Health QSEHRA experts to discuss all things QSEHRA!
QSEHRA requirements are set and monitored by the IRS. Given that QSEHRAs are relatively new in the world of health care, the IRS regularly updates requirements. As a result, it’s important to keep yourself informed of any and all QSEHRA requirement policies and changes. Nonetheless, QSEHRA requirements are fairly straightforward for both employers and employees.
QSEHRA employer requirements
Businesses must be less than 50 full-time employees in order to be eligible to participate in a QSEHRA.
A business is not permitted to offer a QSEHRA while offering a group health care plan. If a business decides they want to participate in a QSEHRA, they must contact their health care provider and schedule a date to cancel their existing plan.
QSEHRA employee requirements
All employees participating in a QSEHRA must be covered by their own health care plan
Employees must submit claims for reimbursement. Businesses must get verifiable proof of your expenses before reimbursing any of your health care expenses.
While it isn’t difficult to qualify as an eligible employee, you as an employer can determine employee eligibility further based on a few additional factors. You are permitted to not allow employees to participate in the QSEHRA if your:
- Employee is a part-time worker
- Employee is a seasonal worker
- Employee is younger than 25 years old
- Employee has worked for the employer for less than 90 days
- Employee is a part of a union (unless the union agreement provides for eligibility)
- Employee is a non-resident alien without income from sources within the United States
As we mentioned above, health insurance compliance is regulated by the IRS and they absolutely do not mess around when it comes to making sure your business is keeping up with legal requirements. Errors made at any stage of set up or maintenance can, at the very least, cost a business $100 per day per employee.
Many businesses opt for a QSEHRA administrator, like Take Command, to eliminate the possibility for error along the way. Whether or not you decide to administer your business’s QSEHRA with the help of administration software, it’s helpful to stay informed.
QSEHRA maintenance rules
- Verify employee eligibility
- Reimburse submitted claims
- File form 720 and pay the Patient-Centered Outcomes Research Trust Fund (PCORTF) fee each year
- Give employees notice of plan renewal
- Securely maintain records for 7 years
- QSEHRA 2023
While the benefits of implementing a QSEHRA for your business are pretty substantial, it is important to take a look at reimbursement limits. Each year, the IRS announces updated reimbursement limits. We’re still pretty early in 2023, so make sure you’re up to date on recent changes before setting up or renewing your QSEHRA plan.
QSEHRA 2023 limits
QSEHRA limits for 2023 effectively increased the overall reimbursement amounts for employers (yay!). This year, businesses with less than 50 employees can contribute a maximum of $5,850 ($487.50 monthly) for individual employees and $11,800 ($983.33 monthly) for employees with a family.
In 2022, employers were permitted to reimburse $400 less for employees and $750 less for employees with a family than they are with the new QSEHRA limits. This comes out to an increase in reimbursement funds of over $33 a month for employees and over $62 a month for employees with a family!
What exactly is a QSEHRA provider? A quick caveat, as we mentioned above, we highly recommend consulting with a QSEHRA plan administrator to help make sure you’re in compliance with IRS regulations.
A QSEHRA plan administrator can help with all things QSEHRA from beginning to end. A good plan administrator will:
- Keep up with all legal documentation regarding compliance, notifications, and reporting
- Support employees through the onboarding process and show them how to get the most out of their QSEHRA benefits
- Support business owners by helping them set up, maintain, and monitor their plan
At Take Command, our QSEHRA providers do all the heavy lifting while you can stay busy running your business. We help by:
- Completing and documenting all legal forms
- Onboarding employee
- Tax and end-of-the-year reporting
- HIPAA and privacy compliance
- Providing an admin portal platform for you to review all reimbursement reports and keep a birds’ eye view on your business’s QSEHRA
We’re excited for you as you begin to take this next step in your business’s journey! If you decide you need a teammate to walk with you, you can easily schedule a free call with one of our QSEHRA administration experts.
Susanne is a copywriter specializing in the health and wellness industry. Before starting her own business, she spent nearly a decade at a marketing agency doing all of the things – advisor, copywriter, SEO strategist, social media specialist, and project manager. That experience gives her a unique understanding of how the consumer-focused content she writes flows into each marketing piece. Susanne lives in Oklahoma City with her husband and two daughters. She loves being outdoors, exercising and reading.