Background

The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) enables small employers to establish a company-funded, tax-advantaged benefit to reimburse consumers for personal health care expenses, including individual market coverage. QSEHRAs are available to employers with 50 or fewer employees and caps benefit amounts at $5,150 for employee-only coverage and $10,450 for consumers with dependents (2019 amounts). To qualify for a QSEHRA, consumers must enroll in minimum essential coverage. Employees offered QSEHRAs considered “affordable” are ineligible for ACA the premium tax credit (PTC), and employees offered “unaffordable” QSEHRAs must reduce their PTC (if otherwise eligible) by the amount of the QSEHRA.

The Individual Coverage Health Reimbursement Arrangement (ICHRA) is a new program for which regulations were finalized in June 2019. ICHRAs enable employers to establish a company-funded, tax-advantaged benefit to reimburse consumers for personal health care expenses, including individual market coverage. ICHRAs are available to employers of any size, there are no benefit caps, and employers may vary eligibility and benefit amount by employee class. To qualify for an ICHRA, consumers must purchase individual health coverage or be enrolled in Medicare. Consumers offered “affordable” ICHRAs or who accept their ICHRA aren’t eligible for the PTC. For employees offered an unaffordable ICHRA and eligible for the PTC, the PTC is generally larger.

At present, the ACA Marketplaces consumers have not generally had time to incorporate the QSEHRA and ICHRA rules into their application architecture. As a result, individuals offered these HRAs are at risk of receiving incomplete or incorrect information about their APTC eligibility and coverage options.

---