ICHRA and QSEHRA
ICHRA and QSEHRA for employers
Instead of choosing one plan for everybody, you set a monthly allowance and employees buy the individual coverage that suits them. Here is how the two main options differ.
Who it is for
Who an individual coverage HRA is for.
A health reimbursement arrangement lets an employer reimburse employees, tax-advantaged, for health insurance they buy on their own. There are two main versions. A QSEHRA is for small employers, generally those with fewer than 50 full-time employees, that do not offer a group health plan. An ICHRA, now called a CHOICE Arrangement, can generally be offered by employers of any size.
- Small employers who want to help with health costs without a group plan
- Teams spread across many states, where one network fits nobody well
- Employers who want a fixed, predictable cost each month
- Businesses offering a group plan to some classes of employee and an ICHRA to others
What can go wrong
ICHRA and QSEHRA: what can go wrong.
Choosing the wrong arrangement
QSEHRA and ICHRA have different eligibility, class and notice rules. Setting up the wrong one can mean redoing it.
Offering a choice the rules forbid
An employer cannot offer the same class of employees a choice between a traditional group plan and an ICHRA.
Employees without qualifying coverage
Employees must have their own qualifying individual coverage to be reimbursed, and someone has to check it.
Notices sent late or not at all
Both arrangements require written notice to employees ahead of the plan year, and a missed notice is a compliance problem.
Allowances that miss the market
An allowance set without looking at individual premiums where your people live can leave them with little to buy.
Coverage that applies
The benefits to put in front of your team.
What is available depends on the carrier, the plan and the state.
Compliance & Administration
Plan documents, employee notices, classes and the affordability questions an HRA raises.
Read more →Group Health Insurance
For comparison, or for the classes of employee who stay on a traditional plan.
Read more →Dental Insurance
Group dental can still sit alongside an HRA for medical.
Read more →Vision Insurance
Group vision can run next to an HRA in the same way.
Read more →Worksite & Voluntary Benefits
Employee-paid supplemental cover to round out individual medical plans.
Read more →What carriers look at
What underwriters ask about.
- How many full-time employees you have, which decides whether a QSEHRA is available
- Whether you offer, or plan to offer, a group health plan to anyone
- The classes of employee you would use, such as full-time, part-time or location
- Where employees live, and what individual plans cost in those markets
- Whether you are an applicable large employer with affordability to consider
Practical tips
Before you decide.
General information, not legal or tax advice. Talk to your broker about your own plan.
- Confirm your employee count first; it decides which arrangement is open to you
- Look at individual premiums where your employees live before setting the allowance
- Use the classes the rules allow, and keep one benefit per class
- Put the employee notice deadline on the calendar ahead of the plan year
- Plan how you will verify each employee’s qualifying coverage
- Talk to your broker and tax adviser before you commit; the rules carry tax consequences
Questions
ICHRA and QSEHRA FAQ
A QSEHRA is for small employers, generally those with fewer than 50 full-time employees, that do not offer a group health plan. An ICHRA, now called a CHOICE Arrangement, can generally be offered by employers of any size and can vary by class of employee. Both reimburse employees for individual coverage they buy themselves.
It is the new name for the individual coverage HRA, or ICHRA. HealthCare.gov now describes CHOICE Arrangements as formerly known as ICHRAs. Your broker can explain what the change means for a plan you have or are considering.
Yes, to different classes of employee, for example a group plan for full-time staff and an ICHRA for part-time staff. You cannot offer the same class a choice between the two, and the classes are set by the rules rather than chosen freely.
Yes. To be reimbursed, employees need their own qualifying individual health coverage, such as a Marketplace plan, a plan from a private insurer or, for an ICHRA, Medicare. Short-term plans and dental- or vision-only plans do not count.
QSEHRA allowances are capped by an annual limit that changes each year, and ICHRA allowances are set by the employer. Ask your broker for the current figures before you set an allowance, and your tax adviser about how they apply to you.
Talk to a consultant