What are QSEHRA and ICHRAs? Understanding Health Benefit Plans for Small Business

The qualified small employer health reimbursement arrangement (QSEHRA) and the individual coverage health reimbursement arrangement (ICHRA) are health benefit plans designed for small businesses. Both QSEHRA and ICHRA give employers the ability to set employee reimbursement allowances for health insurance policies and qualified medical expenses. It’s a win-win approach: employees receive a tremendous benefit, and small businesses can contain their healthcare expenditure.

Differences between a QSEHRA and an ICHRA

While both of these arrangements perform the same essential functions, their operating mechanisms are a bit different. These differences are also what defines their suitability to your business goals. Let’s take a closer look at the characterizing distinctions of the QSEHRA and ICHRA.

  • Business size limitations

There are no limitations to your business’s maximum size if you want to offer an ICHRA—however, there is a minimum of 10 employees to create an ICHRA class. For a QSEHRA, eligibility is limited to companies with less than fifty full-time employees.

  • Allowance restrictions

An ICHRA does not have allowance amount restrictions. A QSEHRA is limited to $5,300 for individual plans and $10,700 for family plans for 2021 and will be adjusted annually. There are no other criteria besides family status that alter these amounts.

  • Group health policy eligibility

QSEHRA and ICHRA’s cannot be offered in conjunction with a group health policy. The employer needs to chose whether to offer traditional employer insurance or a reimbursement arrangement but cannot offer both.

  • Employee eligibility

All full-time employees are eligible for a QSEHRA. The eligibility for part-time employees is at the employer’s discretion. Businesses can determine eligibility based on bona-fide job classes as outlined below.

The 11 classes include full-time employees, part-time employees, seasonal employees, employees with trade union coverage, new employees, off-site employees, salaried employees, non-salaried employees, non-resident aliens without US income, temporary employees, and custom classes. These help determine the offerings that an employee may provide.

  • Waiving coverage

Under an ICHRA, employees can elect to waive coverage. Conversely, employees under a QSEHRA cannot waive coverage.

The Benefits of QSEHRA and ICHRA

Offering a reimbursement arrangement incentivizes employees to purchase or have healthcare coverage while also giving a benefit to employees who maybe purchasing their own health insurance but have been responsible for a 100% of the expense. It’s no secret that small businesses struggle to find quality health insurance coverage for their employees. Indeed, investing in benefits can be a strain on your budget—but it doesn’t have to be when electing to provide a QSEHRA or an ICHRA.

Your employees can choose their own coverage based on their healthcare needs while you are in control of setting tax-free allowance amounts. By offering one of these plans, small businesses gain a competitive edge that levels the playing field with larger competitors. Offering benefits to employees is a huge factor when recruiting and retaining top talent, but can feel out of reach for small businesses. Feeling proud of your benefits package and building an effective team is an option with these cost-effective plans.

Benefits of a Healthcare Broker to Set Up a QSEHRA or ICHRA

When you’re considering a QSEHRA or ICHRA for your small business, it can be challenging to know where to start. With the help of a health insurance broker, finding the best option for your business and your employees becomes easy. Benefits include:

  • Unbiased recommendations
  • Expert advice on plan design
  • Quick access to support
  • Access to all insurance carriers in their respective markets they operate
  • Continued support for employees who select individual coverage and for employers to ensure their arrangement is compliant, competitive and designed to work for their companies benefit goals

We all know dealing with insurance and benefits plans can feel like speaking a foreign language at times. Partnering with agents and teams that have experience in how to optimize your offerings and provide options that will benefit your goals allows you to focus on what you do best.

Partnering with DesignTM Health

DesignTM Health offers healthcare brokerage services to find the best insurance plans to meet your business goals. When you partner with us, you acquire a liaison with a vast network in the employer’s health insurance industry.

Here at DesignTM Health, we approach healthcare solutions with an emphasis on service, tech solutions, benefits booklets, and streamlined back-end administrative functions. We have accessible digital platforms for plan administrators to navigate plans and customize benefit guides for your team.

DesignTM Health is attuned to the changing market and political forces that affect healthcare plans and costs, which is why you can count on us to keep you in the loop and update our recommendations if needed. Contact us today to learn more about how your business can benefit from partnering with DesignTM Health.

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