Why You Should Consider A QSEHRA
A “Qualified Small Employer Health Reimbursement Arrangement,” or QSEHRA, is a new type of benefit plan that may let you provide benefits for your employees without the cost or hassle of finding and maintaining a traditional group health insurance policy. The QSEHRA takes the form of a tax-free allowance that employees can use to shop for insurance and, if you choose, out-of-pocket healthcare costs.
- QSEHRAs are available for employers with less than 50 full-time equivalent employees. (A full-time equivalent is one who works 130 hours per month or more than 30 hours per week for 120 consecutive days.)
- You have to offer benefits to all eligible employees. However, you can exclude part-time and seasonal employees, those who have worked less than 90 days, those who are under age 25, and those who are covered by a collective bargaining agreement that includes health benefits.
- You can reimburse employees up to $5,450 for single coverage and $11,050 for family coverage (2022).
- Employees can use funds to buy insurance in the individual market or on their state’s ACA exchange. Coverage must meet the ACA’s “minimum essential coverage” rules or reimbursements may become taxable.
- Employees who buy coverage on the exchange must report QSEHRA funds when applying. Those funds will reduce any subsidies they qualify for on a dollar-by-dollar basis.
- You can choose to let employees who have funds left over after buying insurance use those amounts for any out-of-pocket expense that would be deductible as “medical and dental expenses” under Code Section 213(d).
- You can also choose to let employees who are already covered under a spouse or other family member’s insurance use QSEHRA funds for out-of-pocket expenses.
- You’ll need a written plan document and systems for verifying and reimbursing expenses.
- QSEHRAs have no COBRA continuation requirements.
The biggest advantage of the QSEHRA is that it makes benefit costs predictable — no more “good news” letters from your health insurance company announcing 20% (or higher) premium increases! The QSEHRA also avoids typical limitations employees face when choosing healthcare providers from a single insurance carrier’s network.