Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

A QSEHRA allows small employers to provide non-taxed reimbursement of certain health care expenses, like health insurance premiums and coinsurance, to employees who maintain minimum essential coverage, including an individual Marketplace plan. In many states, QSEHRAs allow small employers to provide their employees additional plan choices without managing group health plan coverage.

With a QSEHRA, small employers can decide what they’ll contribute to their employees’ health care costs, up to an annual maximum that is set by the IRS. Employees pay their provider or insurance company for their health care costs, then submit proof of payment to be reimbursed by the QSEHRA. Reimbursement is tax-free. If an employee doesn’t submit a claim, the employer keeps the money, though they may choose to roll it over from year to year while the employee is still employed by the business. Typically, QSEHRA amounts claimed by employees are paid monthly by their employer.

To qualify for a QSEHRA, a small employer generally must:

• Have fewer than 50 full-time employees
• Provide the arrangement on the same terms to all full-time employees (reimbursement amounts may only vary based on age and the number of individuals covered)
• Not offer a group health plan, like SHOP coverage or a flexible spending account (FSA)