Are you ready to start offering benefits to your employees through a small business HRA (known as QSEHRA)? One of the first things you need to consider is your budget and how you will set monthly allowances for your employees. The monthly allowance is the amount of money employees will receive each month to reimburse their individual health insurance and medical expenses.
What to remember when setting a budget for your QSEHRA
Types of Allowances
The amount of allowance you offer can vary depending on the family status of the employee.
- Self-only for single employees without dependents. The federal maximum allowance is $5,300 annually.
- Family for employees who are married, have dependents, or both. The federal maximum allowance for a family is $10,700 annually.
The good news is you can contribute as much or as little as you want (or can afford) to offer your employees as long as you stay within the federal maximum allowance caps. Just remember, as your company grows, the allowances you set will be the same for all future employees as well.
Example: Tim’s company has 6 full-time employees. He has designed his HRA with contributions of $250 for single employees and $500 for employees with family. 4 of his employees are single and 2 of his employees have family. Tim will budget ($250x4) + ($500x2)= $2,000/month for his HRA contributions.
With an HRA, your business only incurs a cost when employees submit health insurance premiums or medical expenses for reimbursement. This means the real cost of the HRA is dependent on how much of the allowances your employees use. The company keeps any unused funds. One study found that employees typically claim about 87% of their HRA allowances.
Still need help setting a budget for your QSEHRA?
If you still have questions, set up a time to talk to one of the experts at Take Command! We can answer any questions you might have, such as "is my business eligible for a QSEHRA?" or “how do I set up an HRA” or “will the HRA really be good for my business?”.
Another great resource is the setup chapter in our handy QSEHRA guide!
We take pride in simplifying the health insurance marketplace for you so you can go back to running your business.
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!