Employees have great options from Covered California

California law requires all residents to maintain health insurance that meets Minimum Essential Coverage or face a tax penalty. While employers are not always required to provide this coverage (depending on size), offering an HRA like a QSEHRA or ICHRA empowers your employees to purchase their own qualifying plans on the individual market, ensuring they satisfy the state mandate while using tax-free dollars provided by you.

• QSEHRA (Qualified Small Employer HRA): Specifically for businesses that have fewer than 50 full-time employees and do not offer a group plan. QSEHRA has annual contribution caps set by the IRS ($6,450 for individuals / $13,150 for families in 2026).
• ICHRA (Individual Coverage HRA): Available to businesses of any size. There are no contribution limits, and you can offer different amounts to different "classes" of employees (e.g., salaried vs. hourly).

Yes. If you provide an HRA, you have reporting obligations to the California Franchise Tax Board.

• March 31st deadline: You must report coverage details (names, tax IDs, and dates of coverage) for the previous year.
• January 31st deadline: You must provide a written statement to your employees confirming the coverage provided to help them avoid the state's individual mandate penalty. Failure to report can result in a penalty of $50 per individual.

Note: Take Command manages HRA compliance and reporting requirements for our clients. Our HRA platform provides the necessary data, forms, and tracking to ensure employers remain compliant with IRS and ACA regulations.

Yes. HRAs are highly flexible. Under QSEHRA, you must offer the benefit to all full-time employees, but you can choose whether or not to include part-time and seasonal staff. Under ICHRA, you can specifically create a "class" for part-time workers and offer them a different reimbursement amount (or no HRA at all) while maintaining a group plan for full-time staff.

In many California metros (like Los Angeles, San Francisco, and San Diego), the individual market is very competitive. Often, the cost of individual premiums is lower than group rates. By using an HRA, you gain budget predictability because you decide exactly how much to contribute per month, avoiding the annual premium hikes common with traditional group plans.