75% of employees report that they are more likely to stay with an employer because they offer a robust benefits plan. While some benefits, like work-life balance, are highly valued, they are not typically part of a traditional benefits package. When employees are thinking about benefits, studies show the biggest thing that they desire is healthcare, followed closely by retirement plan and paid time off.
ICHRA and QSEHRA are two emerging types of health reimbursement plans, or HRAs, that can allow your employees to get the care that they need, specific to their personal or family preferences. These programs also mitigate employer involvement beyond funding. What are the key differences between the two?
What Is an ICHRA?
An ICHRA is an individual coverage health reimbursement arrangement. This is a newer type of HRA that has only been around for three years. ICHRA programs give employers of any size the opportunity to cover some or all of employee health insurance premium costs through reimbursement. This type of reimbursement program gives your employees the chance to choose the perfect plan for their needs, increasing flexibility, and your business the opportunity to reimburse some or all of the cost.
What Is a QSEHRA?
A QSEHRA is a qualified small employer health reimbursement arrangement. These are used by smaller businesses that do not currently offer another option for group healthcare coverage. QSEHRAs give you the chance to offset your employees’ healthcare spending and contribute towards coinsurance or their monthly premiums. Only businesses with 50 or fewer employees can offer QSEHRAs.
How Do ICHRA and QSEHRA Plans Work?
Both of these health reimbursement arrangements are set up by the employer and offered to the employees, and they are also utilized in the same manner. You will set a maximum amount that you are willing to cover per employee. When your employees spend their money on medical expenses like health insurance and things covered by IRS Publication 502, Once employees pay for the healthcare services, they will submit their expenses to your business using your preferred system. Most businesses typically ask for a receipt and the amount, the date of the expense, and a short description of what the expense was (doctor’s appointment co-pay, insurance premium, etc.). Next, you’ll review and approve the requests and then give the employee a tax-free reimbursement.
How Are the ICHRA and QSEHRA Different?
The biggest difference between these two reimbursement arrangements is what employers can offer them. QSEHRAs can only be used by companies with 50 or less employees. However, organizations of every size can offer an ICHRA. Other differences include:
- Only employees who are enrolled in minimum essential coverage and not currently participating in another group health plan can use a QSEHRA. With an ICHRA, all employees enrolled in a health insurance plan are eligible.
- QSEHRA plans have a maximum contribution limit of $454.16 a month for individuals or $920.83 a month for families. For businesses with under 50 employees, there are no ICHRA limits. However, for businesses with more than that, the ICHRA must be affordable depending on what the employees are making.
- Businesses using a QSEHRA can offer different allowances based on whether it is a single employee or a family. However, businesses with an ICHRA plan can provide allowances based on age, family status, or the type of employee.
Just as Consumer-Driven Healthcare (CDH) took flight in the early 2000’s, we expect that ICHRA’s will grow in popularity. Investors and technology platforms are already flooding the space to gain market share.
The right benefits for your business depend on a variety of factors, so working with the right partner is key. To learn more about how our team can assist you in designing and implementing attractive benefits packages, please call our office at 240-422-8799 or email Jessica Storck at Jessica.storck@tribridgepartners.com.
