ICHRA vs QSEHRA: Which is Right for Your Business?

Choosing between an Individual Coverage Health Reimbursement Arrangement (ICHRA) and a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) can be challenging for small business owners. Both offer unique benefits and cater to different business needs. This guide will help you understand the key differences and determine which option might be best for your business.

Understanding ICHRA

ICHRA allows businesses of any size to reimburse employees tax-free for individual health insurance premiums and qualified medical expenses. It offers flexibility with no contribution limits and can be customized by employee class. However, it requires more administrative setup and can affect an employee’s eligibility for premium tax credits if not structured carefully.

Understanding QSEHRA

QSEHRA is available to businesses with fewer than 50 full-time equivalent employees that do not offer a group health plan. It allows tax-free reimbursements for individual health insurance premiums and eligible medical expenses, up to annual IRS-set limits. QSEHRA offers flexibility and cost control but requires clear communication and documentation to stay compliant.

Key Differences

Feature	ICHRA	QSEHRA
Eligible Employers	Any size	Fewer than 50 FTEs
Contribution Limits	None	IRS-set annual limits
Customization	By employee class	Not customizable
Administrative Requirements	Higher	Moderate
Impact on Premium Tax Credits	Potentially affects eligibility	No impact

Both ICHRA and QSEHRA offer valuable benefits to small businesses looking to provide health benefits without traditional group plans. Consider your business size, budget, and employee needs when choosing the right option.