Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) and Individual Coverage Health Reimbursement Arrangements (ICHRAs) both allow companies to set monthly amounts to be paid out for health insurance purposes through the HRA. They free employers and employees from the burden of the one-size-fits-all traditional group plan structure. Each of these HRAs serves a similar purpose but have many differences that make them unique and essential to the success of an alternative form of group health insurance. We’ll address these similarities and differences here:
| QSEHRA | ICHRA |
Law Enacted | December 2016 | June 2019 |
Applicable Company Size | 49 or fewer full-time employees that offer no employer group health plan (minimum size 1) | Any size group (minimum size 1) |
Considered a Group Health Plan | No | Yes |
Contribution Guidelines | Companies can offer different contribution allowances based on age and family status, but maximum contributions apply ($5,850 single, $11,800 family annual limits in 2023) | Companies can offer different allowances based on age, family status, and employee class. No maximum contributions apply |
Healthcare Purchase | Employees purchase healthcare insurance based on their specific needs | Employees purchase healthcare insurance based on their specific needs |
Offered with a group plan | Company can't offer a group medical, dental, or vision plan | Yes, but the company can't offer both the group plan and the HRA to the same employee class |
Employee Eligibility | All full-time employees are eligible. Part-time employees may also be included but the HRA must be offered on the same terms | Company determines the eligibility guidelines according to each employee class, but the HRA must be offered on the same terms to all employees in each class |
Coverage requirements | Employees must have minimum essential coverage | Employees must have individual major medical coverage |
Effects of Premium Tax Credits | Employees can receive premium tax credits, but the amount received is reduced from the HRA allowance | Employees are not eligible for premium tax credits if the employer contribution is considered affordable |
COBRA | Not subject to COBRA | Subject to COBRA for employers with 20 or more employees |
Medicare | Integrates with Medicare | Integrates with Medicare |
Waiving Coverage | Employees may not waive coverage | Employees may waive coverage |
Previous Employees | May not participate | May participate in an ICHRA assuming they continue to have individual major medical coverage or Medicare |
ERISA | Applies | Applies |
Flexibility | Reimburse qualified medical expenses – exclusively available to small employers | Covers individual health insurance premiums |
In summary, QSEHRAs and ICHRAs are both valuable health reimbursement arrangements, each catering to different employer sizes and preferences. Understanding each option can help employers make informed decisions about the best fit for their organization and employees.