What’s an ICHRA? What’s a QSEHRA? Curious Minds Want to Know!

Only about 50% of Americans receive group health insurance through their employer, according to 2019 U.S. Census data. Some employers who don’t provide group health insurance to all (or any) employees will offer an ICHRA or QSEHRA instead. In case you’re not sure what these are, we’re here to explain.

What is an ICHRA?

ICHRA stands for Individual Coverage Health Reimbursement Arrangement. An ICHRA is funded only by the employer to help employees pay premiums for individual health insurance coverage. Some also help cover IRS-approved medical expenses.

• To qualify for ICHRA reimbursement, the employee must be covered by an individual health insurance plan.
• Qualifying coverage will be verified by the employer before reimbursement.
• Policies purchased through Health Insurance Marketplaces (on-exchange plans) qualify for ICHRA reimbursement, as do those purchased elsewhere (off-exchange plans). Medicare Parts A, B, and C are eligible as well. 
• Some ICHRAs will also reimburse for IRS-approved healthcare expenses, in addition to the insurance premiums. The covered employee submits a claim and receipt to receive reimbursement.
• The employer can offer a group health plan to some employees and an ICHRA to others, but no employees can be eligible for both coverages at the same time.
• Reimbursements received from an ICHRA account are tax-free to the employee and deductible as a business expense by the employer.

What is a QSEHRA?

Qualified Small Employer Health Reimbursement Arrangements, or QSEHRAs, are similar to ICHRAs, except they are only available to employers with fewer than 50 full-time employees. The employer also cannot offer a group health insurance plan to any employees.

The individual health insurance coverage must meet Minimum Essential Coverage (MEC) requirements to qualify for a QSEHRA. Otherwise, a QSEHRA is mostly similar to an ICHRA:

• The employee must be covered by an individual health insurance policy to receive reimbursement.
• Qualifying coverage will be verified by the employer before reimbursement.
• Some QSEHRAs also cover IRS-approved healthcare expenses in addition to the insurance premiums. The covered employee submits a claim and receipt to receive reimbursement.
• Reimbursements received from a QSEHRA account are tax-free to the employee and deductible as a business expense by the employer.

Check Out Our Infographic!

Betty and I have prepared a handy infographic to help you understand the differences between an ICHRA and a QSEHRA as well as other types of Health Reimbursement Accounts. Take a look!