So what exactly does a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) setup consist of? Exploring new healthcare options can seem overwhelming for some. Take it from us, it’s easier than you may think. Check out the QSEHRA rules and requirements listed below to see how you can have your QSEHRA set up by the end of the day!
If your business is qualified to participate in a QSEHRA, the setup is pretty simple. Most businesses take advantage of using QSEHRA administration software to help free up time, but it is possible to do so in-house with a QSEHRA administrator. With QSEHRAs rapidly increasing in popularity, you definitely don’t want to miss out!
How to set up a QSEHRA
Aren’t sure where to start? Follow these seven steps and you’ll be enrolled and processing reimbursements before you know it.
- Choose your start date. You first have to select your start date! If you don’t have an existing group plan that needs to be canceled, you can have your QSEHRA start immediately. Otherwise, you’ll need to choose a start date that begins after your current plan is canceled.
- Cancel your group plan (if you have one). If you’re currently offering a group healthcare plan, you’ll need to cancel it. To ensure your employees don’t have any gaps in coverage, select a cancellation date that is no more than one day before your new plan begins.
- Confirm employee eligibility. One of the requirements of a QSEHRA is that it is equitable among all of your employees. In other words, you must offer the plan to all full-time employees. You may choose to offer it to part-time employees as well, but it is not required.
- Determine your budget. You must identify your budget and determine how much you’ll offer your employees towards their reimbursed expenses. When doing so, you can vary reimbursement amounts based on classes, age, and family size. There is no minimum contribution on your end to be eligible to participate in a QSEHRA, however, take a look at the 2023 contribution limits for specifics.
- Establish QSEHRA plan documents. QSEHRAs are regulated by the IRS and there are a few legal documents that must be completed before you can officially begin. Your documentation must include your HRA policies such as your monthly reimbursement amounts and employee eligibility. For more detailed information about QSEHRA plan documents, check out this helpful article.
- Introduce employees to their new plan. One of the biggest benefits of participating in a QSEHRA is the support and flexibility that it offers your employees. Make it as easy and rewarding as possible for them by ensuring they know how to use their new policy! During the onboarding process, they should be informed about start dates, annual HRA allowances, and how to get coverage. For more guidance on QSEHRA employee notice suggestions, read this article.
- Provide resources to employees. Now that your employees are enrolled in your QSEHRA, you can help them out by guiding them through selecting the best individual healthcare plan that best fits their needs. While you can’t be involved in their decision-making process, you can offer them resources to support them in making an informed decision.
→ Check out this post on how to communicate a QSEHRA benefit to your employees
To save you time, energy, and possible confusion during the setup stage of your QSEHRA, experts at Take Command are available to help you from beginning to end.
A commonly asked question is whether QSEHRAs are able to be self-administered. The answer is… kind of. Although, we recommend against it for a few reasons.
- Privacy. The nature of a QSEHRA requires frequent examination of personal employee information. Each month, employees submit medical information for themselves and their family members. As their employer, you are not legally permitted to have access to that information. In order to protect the privacy of your employees, you would need to hire an account administrator to oversee employee accounts, reimbursement requests, and other protected information.
- Paperwork. Keeping up with the paperwork involved in maintaining a compliant QSEHRA is a full job in and of itself. Not only do all records need to be stored securely, but the IRS requires that all records be stored securely for up to seven years. This includes all receipts, reimbursement requests, approvals, payments, and other protected information. Tracking all the documentation on top of running a business is enough to begin the search for QSEHRA administration software like Take Command.
- Compliance. If the privacy and paperwork weren’t enough to keep track of, businesses who self-administer their QSEHRAs also need to make sure they’re in compliance with HIPAA regulations. The Health Insurance Portability and Accountability Act of 1996 protects any and all patient medical information. Failing to comply with HIPAA laws has penalties that range from $100 to $250,000 and up to ten years in prison.
2023 QSEHRA limits
New year, new contribution mandates! The IRS recently announced its 2023 QSEHRA limits. Based on QSEHRA requirements, there are no minimums for reimbursements. However, these annually adjusted limits lay out the maximum amounts that small businesses are permitted to reimburse.
The 2023 QSEHRA limits state that businesses with less than 50 employees can contribute a maximum of $5,850 for individual employees and $11,800 for employees with a family. This comes out to $487.50 monthly and $983.33 monthly respectively.
Compared to 2022 QSEHRA limits, employers are now able to offer an increase of $400 for individuals and $750 for employees with a family- each year! Breaking this down on a monthly basis, individual employees are eligible to receive $33.33 more a month and employees with a family are eligible to receive $62.50 more a month.
All in all, 2023 is not a bad year to hop on the QSEHRA train!
QSEHRA employee requirements
An employer is eligible to participate in a QSEHRA plan as long as they have less than 50 employees and don’t offer a group health care plan. As long as an employer is eligible to participate in a QSEHRA plan, each employee may seek to qualify to take part. However, the IRS allows businesses to make exceptions based on a few distinctions. A business is permitted to not allow employees to participate in the QSEHRA plan if:
- 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 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
QSEHRA eligible expenses
Part of the onboarding process is making sure your employees (and you!) understand the benefits of participating in your business’s QSEHRA. Sharing information about QSEHRA-eligible expenses is sure to get everyone excited about their new plan.
Each year, the IRS posts an updated list of expenses that are eligible for reimbursement by their employer. The list for 2023 includes:
- Medical diagnoses, cures, treatments, and preventions
- Personal care products
- Health insurance premiums
- Qualified long-term care services
- And many, many more
By informing your employees of all possible eligible expenses, they are able to fully take advantage of QSEHRA reimbursements.
Don’t forget that not only are your employees able to pay for qualified medical expenses with pre-taxed funds, but you, as their employer, save an incredible amount each month by avoiding group health care plans. It’s a win all around!
Although QSEHRAs are fairly flexible, there are a few QSEHRA requirements to consider when deciding if enrolling your business is an option for you.
- Your business must have fewer than 50 full-time employees.
- You must not sponsor a group health care plan while participating in a QSEHRA.
- You must not endorse a specific health care policy or carrier.
An example would be a small church with less than 10 staff members looking for affordable church health insurance.
Pretty straightforward, right?
Once you have your plan set up and ready to be implemented, there are a few more QSEHRA requirements to keep in mind.
- Reimbursement amounts are set. While there are no reimbursement minimums, the IRS sets maximum annual reimbursement amounts per employee.
- Employee participation is equitable. Employers can offer different reimbursement amounts for members of different classes (based on age, family size, etc.). However, members of the same class must be offered equal reimbursement amounts.
- Employees are provided with written notices. Employees must receive written notice 90 days before each new year if the employer plans to participate in a QSEHRA.
- Minimum essential coverage is verified. Employees are able to begin submitting expenses for reimbursement once they have provided documentation that their individual health insurance meets Minimum Essential Coverage (MEC) standards.
- Medical expenses are substantiated. Employees also need to provide proof of medical expenses when submitted for reimbursement.
- All reimbursements are recorded. The IRS requires that QSEHRA reimbursement limits be reflected on employees’ W2s.
Remember, QSEHRA requirements are determined and regulated by the IRS. If you feel you may need a third party to come in and help oversee administration, reach out to Take Command Health QSEHRA experts. We’ll take care of all your administration needs–onboarding, legal compliance, reimbursement requests, and all tax upkeep throughout the year!
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.