You’re not the only one who wants to know what the difference is between an ICHRA and a QSEHRA. This is one of the more common questions business owners ask when they’re trying to decide which benefits to offer their employees. Both plans are health reimbursement accounts (HRAs). They make it possible for you, the employer, to give your workers benefits that are both affordable and tailored to their needs. They each let your employees save money exclusively for their health care needs. While ICHRAs and QSEHRAs are similar in what they offer, they work in different ways. Understanding them is the first step in deciding if you’d like to offer one or the other depending on your budget and how you’d like your employee benefits to work.

What are HRAs?

Before we get into these two types of HRAs let’s look at what a standard HRA is. A HRA might be the best way for a small business to help its workers get coverage at a price they can afford. HRAs are not health insurance plans. Instead, they are a way for employers to reimburse their workers for their health care costs that is allowed by the IRS. These are not accounts like HSAs or FSAs. Instead, they are agreements (hence the name), which makes them easier to use than bank accounts. 

Employers don’t have to have a pre-funded account for distributing the money, but they can if they want. They keep the money until an employee files a claim for reimbursement. So, if an employee doesn’t ask for reimbursements or doesn’t ask for the full amount, the employer gets the money. On top of that, there are no taxes on the reimbursements! 

What Are ICHRAs?

An ICHRA is a tax-free health benefit paid for by an employer that reimburses employees for their qualifying medical costs. With an ICHRA, employers give their workers a tax-free allowance each month to pay for certain medical costs. Employees then buy the health care services and things they want, like individual health insurance coverage, and the company reimburses them up to their allowance amount. Your employees can compare their options for individual coverage on the government health insurance marketplace.

There is no annual limit on how much an employer can contribute, and you can give different classes of workers different allowance amounts. There are two more things to keep in mind. First, employees and their families are only qualified for the ICHRA if they have coverage through a qualifying individual health insurance policy. If the employee or a family member who is part of the individual plan loses benefits, they can no longer get reimbursements.

Second, there are limits on the insurance tax credit in the ICHRA. Specifically, if an employee takes part in the ICHRA, they are no longer qualified for premium tax credits. Because of this, workers are free to opt out of the ICHRA as long as their allowance amount is considered “unaffordable” and wouldn’t provide minimum value under the ACA.

ICHRA Process

Here’s a step by step process for operating an ICHRA.

• You set the allowance – The amount of tax-free money you give to an employee for qualified costs is set by you. There can be different amounts for each type of employee. Such as full-time employees, part time employees, seasonal workers, etc. In general, ICHRA allowances for each class of workers should be the same. You can, however, give different allowances within that employee class based on the age of the worker or the size of their family.
• Employees receive healthcare – Employees pay for their own health care with their own money. They can buy the health goods and services that are right for them, such as individual health insurance.
• Employees submit proof – When an employee has a medical expense, they must show you proof. Such as a receipt or a letter from their insurance company explaining the services they received.
• You review – When an employee has a medical cost, they must show you proof. Like a receipt or a letter from their insurance company explaining the services they received.
• You reimburse the employee – The company pays back the worker up to the amount of their allowance. Both the business and its workers do not have to pay taxes on these reimbursements, but once the employee’s allowance limit is hit, they can’t get any more reimbursements.

Who Can Offer An ICHRA?

Even though ICHRAs are available to all organizations, a company can’t give both the ICHRA and a QSEHRA. You also can’t offer both an ICHRA and a group health plan to the same group of employees. For example, you could offer full-time employees a traditional group health plan and part-time employees an ICHRA, but you couldn’t give full-time employees an option between the group health plan and the ICHRA; it’s one or the other. ICHRAs are a good choice for businesses with 50 or more workers. Under the ACA’s employer mandate, you must give at least 95% of full-time employees health insurance that meets the minimum necessary coverage. Meaning they include the “10 essential benefits”.

What Is A QSEHRA?

A qualified small employer HRA (QSEHRA) is an official health benefit that has been approved by the IRS. It lets small businesses with fewer than 50 full-time employees pay their workers tax-free for their health insurance premiums and other health-related costs. With a QSEHRA, workers don’t have to sign up for a certain type of health insurance in order to be eligible. This gives them the freedom to choose any insurance plan they want. 

Payroll taxes do not have to be paid on any QSEHRA reimbursements by you or your employees. If an employee has health insurance that offers minimum essential coverage (MEC), he or she may not have to pay income tax on reimbursements. Because these reimbursements are not taxed, workers don’t have to count their QSEHRA as income at the end of the year. Unlike traditional group health insurance, the QSEHRA doesn’t have minimum employer contribution limits. This means that you can give this benefit to your employees even if you don’t have a lot of money, but there are limits on how much you can give.

Also, there are no participation requirements to offer a QSEHRA. So you don’t have to have a certain number of workers registered in the benefit in order to offer it. Employers can set monthly budget caps with a QSEHRA, which gives them full control over their costs. Once the limits have been set, they can’t be broken. Also, because a QSEHRA doesn’t need to be pre-funded, costs are only paid out when an employee has a qualifying expense. Any money that isn’t used stays with you.

Who Can Offer a QSEHRA?

For your company to be qualified for the QSEHRA benefit, it must have fewer than 50 full-time employees. According to the Affordable Care Act, if you have 50 or more full-time employees, your company is a large employer. This means you can give an individual coverage HRA (ICHRA), but not a QSEHRA. In addition to having to be a certain size, an eligible employer cannot give a QSEHRA and any other group plan at the same time. If an employer wants a QSEHRA and already has a group health insurance policy, they can cancel it and become qualified.

Which Is Better For My Business?

If you want to use an ICHRA or a QSEHRA, you need to think about a few different things. You should start by thinking about your workers and what they need. Benefits are used by many employers as a way to keep good workers and attract new ones. Your benefits should be as personalized as possible to the people on your team. An ICHRA is likely your best choice if you want a more flexible health benefit. Such as more customization with employee classes, no limits on yearly contributions, or meeting the employer requirement.

But a QSEHRA is the way to go if you want a health benefit that is less expensive than group health insurance, easy to set up and run, and works for qualified small employers with less than 50 workers. No matter which HRA you choose, you’ll be picking a customizable health benefit that will give your workers more control over their own healthcare decisions while saving your company money.

Working With EZ

HRAs are a great way for employers to help their workers’ pay for medical costs they have to pay for on their own. Employers can keep costs down while giving their workers a perk that lets them pay for their own medical care. There are different kinds of HRAs, so most businesses will be able to find one that works for them. This is what makes HRAs so special and why they are becoming more and more popular. We’re also here to help if you need help figuring out the complicated world of insurance.

If you want to learn more about your choices for group insurance, you can get in touch with us at EZ. We’ll put you in touch with a highly trained person who can help you decide if an HRA is right for you and your business. You’ll save time, never have to deal with trouble, and never have to pay for our services. EZ.Insure will put you in touch with a specialized agent for free, so let’s get started!  Put your zip code into the box below to get a price right away. Call 877-670-3531 to talk to your own agent.

Should I use an agent or broker?

Both insurance brokers and insurance agents act as the middlemen between insurance buyers like you, and insurance companies. Using an insurance agent, like one of EZ’s, is the best option for small business owners looking to purchase a healthcare plan. Agents can expedite the buying process, they have specialized knowledge about the policies they sell, and they can keep you up-to-date on any changes to your plan. Our agents also have access to exclusive products from the top-rated insurance companies, which can save you more money than if you go it alone. 

What is the minimum number of employees to get a group plan?

If you have 50 or more full-time employees, you are required to provide health insurance or you will be penalized under the employer mandate of the Affordable Care Act. You are eligible for a group plan as long as you have 2 full-time (or full-time equivalent) employees, including yourself. Full-time employees are considered those who work 30 hours or more a week. 

The 2-employee rule is always true for tax-advantaged small business health insurance options program (SHOP) plans (although you will need 70% participation in your plan). If you’re looking into other group plans, some insurance companies may have different requirements. Ask one of EZ’s agents to check for you. 

What is the average cost for a group health insurance plan?

Small business health insurance costs are determined by your location, number of employees, and how much you would like to contribute to your employees’ coverage. The average cost of annual premiums for employer-sponsored health insurance was $7,188 for individual coverage and $20,576 for family coverage in 2019. The average annual deductible amount for individual coverage was $1,655 for covered workers. 

SHOP plans, as mentioned above, can offer some savings through the small business health insurance tax credit, if you have fewer than 25 full-time employees and meet certain requirements.  Speak with an EZ agent about this possibility, or use our online tool to check fast, no-cost quotes for all available plans. We can help cut costs – but not benefits – by comparing multiple plan options.

How do I communicate the new benefits to my employees?

Simple, just ask your EZ agent! EZ’s agents are experienced in helping you communicate new benefits to your employees. Our agents will provide a Summary of Benefits Coverage (SBC) to participants and their beneficiaries before enrollment in the plan, at renewal of the plan, within 90 days of a Special Enrollment, and within 7 business days of a written request. They will also help you provide each employee covered under the plan a Summary of Material Modification (SMM) when there are changes made to their health benefits. 

How much do I charge employees to be on the plan?

Employers are required to contribute at least 50% of each employee’s health insurance premiums. On average, employers contribute approximately 82% of individual insurance premiums, and around 71% of family plan premiums. The more that you contribute to your employees’ premiums, the more likely employees are to enroll, and the more you will save – and don’t forget all of these contributions are tax-deductible! 

You have options when it comes to plans and premium prices, so talk to an EZ agent about what’s best for you and your employees. For example, if you choose a plan with a low deductible, but higher premium, you may not be able to contribute more than 50%, and your employees might find it too expensive to enroll in your plan. In this case, you might want to look into a high deductible health plan, which would allow your employees to contribute to a health savings account (HSA). An EZ agent can help you determine how much you can afford to contribute, and other ways you can save!

Will offering health insurance help me attract better employees?

Businesses that offer health insurance tend to attract and recruit the best candidates. Most job seekers won’t even look twice at a posting if an employer does not offer health insurance – job seekers want to know that a prospective employer is willing to invest in them. Surveys show that 46% of job seekers said that healthcare was a deciding factor in taking a job, and that 60% of employees would take a job with lower pay but better benefits. 

Will my employees be happier if they have health insurance?

Offering health insurance can mean having more loyal employees and a lower turnover rate. 83% of employees say health insurance is extremely important when deciding whether or not they should change jobs. Employees with health insurance are happier, less likely to leave their jobs, and healthier.

One survey found that 72% of employees said having more work benefits would increase job satisfaction. Knowing that they will be protected in case of an emergency, that their chronic conditions will be covered, and that they will not have to worry about large medical bills, means less stress for them and more productivity for you. 

Will productivity go up if we offer health insurance?

Absolutely! In one recent study, 60% of employers said that offering health insurance led to higher productivity levels at their businesses. Not only will offering health insurance to employees lower their stress levels, but it will also keep them healthy – and healthier employees are less likely to take time off for being sick. When you invest in your employees, you’re boosting your bottom line.

What other benefits should I consider offering?

When choosing a plan, look at what “extra” benefits it offers – for example, telemedicine. This convenient option can actually save you thousands due to the reduced cost of healthcare claims from unnecessary visits to the doctor and reduced visits to the emergency room. It is more convenient (and less expensive) for employees to call and speak with a doctor to receive care.

You can also consider offering a workplace wellness program. These programs help keep healthcare costs down by giving incentives to  employees to live healthier lives. These programs can include things like health screenings, programs to quit smoking, gym membership stipends, diet and weight loss programs, or diabetes management programs. To find out what extra benefits you can offer, talk to an EZ agent. 

How will I know if my doctor and my employees’ doctors are in-network?

If you are looking for a plan that includes specific doctors, speak to an EZ agent to find a plan that includes the best network for you and your employees. Our agents can easily access any insurance company’s networks and included providers in minutes. 

If you already have a plan, check your plan info to see if there’s a list of covered doctors. You can also call your doctor’s office, ask for their tax ID number, and then call your insurance carrier to find out if they are covered. Or you can avoid this long and annoying process by simply asking one of EZ’s agents to check for you!  

EZ.Insure understands how time consuming and overwhelming finding a group health insurance plan for your small business can be. To make the process easier, we provide you with a personal agent who will answer all of your questions, compare plans, and provide you with free, instant, and accurate quotes. We do all the heavy lifting for you so that you can provide the best insurance for your employees, without breaking the bank. Let us help you save time and money. To get started, enter your zip code in the bar above, or to speak to a specialized agent within your area, call 888-998-2027.

employees costs a lot of money, so some companies opt out of providing insurance. But are they required to? Yes, and no.

Affordable Healthcare Act

There is no specific law that requires employers to provide health insurance coverage to their employees. However, in January of 2015, the Affordable Care Act, ACA, required that employers who have 50 or more full-time employees provide health insurance. If they do not, they will face a tax penalty.

According to the ACA, full-time employees are employees who work an average of 50 hours a week.

Group Insurance Penalties

If a larger company with 50 or more full-time employees does not offer health insurance, they are subject to IRS penalties. 

The IRS will penalize the company if one or more of their full-time employees gets a premium tax credit for getting their own health insurance coverage from the Marketplace. The company can owe up to $2,500 for each employee. 

The company must offer insurance to 95% of their employees to avoid a penalty, and it must be year round. If the business offers healthcare for some months, and not others, then they will face a portion of the annual penalty.

Small Businesses

Small businesses are not required to offer healthcare coverage to their employees. Since they have less than 50 full-time employees, they will not face penalties. If a small business does not offer health insurance, then a person can seek their own health insurance plan from the Marketplace or a private company.

While there is no longer a penalty for going without healthcare coverage, it is important to seek out information on different plans. There are plans within your budget that will meet your needs and lifestyle. If you need help searching and comparing all the group insurance plans around, EZ.Insure can help. We offer local specialized insurance agents that can do all the comparisons for you, and just provide you the quotes. All for free! It’s that simple. To begin, enter your zip code in the bar above, or to speak to an agent, email replies@ez.insure, or call 888-998-2027. There is no hassle involved, and no obligation to buy, and no headaches. Just easy, fast, and free quotes!

Not convinced small business coverage is worth it?  Find out why we think it is.

1. It’s Cake.

As a business owner, your greatest currency is time. So the last thing you want is to waste that on looking for the right group plan.

When you hire an agent, you hire a full-time tour guide committed to navigating you through the selection process. With demographics, health concerns, and company size to consider, there are plenty of factors that must be included in your final decision.  An agent can explain the nitty-gritty details of selecting a plan that fits your company’s needs, instead of you spending an unbelievable amount of time trying to digest the vast sea of information. Consider them

your “sparknotes” of insurance plans.

This connection is 1-to-1, because trust us – we hate spam calls as much as you do.

Connect With a Personal Agent Now

2. Less Money (From You), Less Problems.

One of the biggest misconceptions about purchasing insurance is the hefty price tag that comes along with it.  And that can be true, if you go about the process in the wrong way. So we’re here to dispel that myth. 

Compared to individual health insurance, high costs of one insured person have a smaller effect in a larger pool – in other words, more people are paying to support the few who use the benefits of being covered to their full extent.

With comparison shopping, you avoid that. You are guaranteed to find the right plan at an affordable price.  You can contribute nothing to a plan – and it will still be beneficial for your employees. No risk is necessary.

It is important to keep in mind that you are not only the owner of your company; you are the owner of the plan selection. 

Checking out your options is a great place to start.

3. “I Want YOU To Buy Health Insurance!”

If you still don’t believe in the affordability of group health coverage, consider this – it’s on Uncle Sam.  Two words for you: Tax. Benefits. 

Here are the tax savings you get by offering group health insurance:

• Employer contributions are tax-deductible
• Employer payroll taxes are reduced by 7.65% of employee contributions
• Employer workers compensation premiums are reduced
• No payroll taxes and workers compensation premiums on money used towards health benefits. 

And here are the tax savings your employees get by receiving group health insurance:

• When employees buy health insurance on their own, they have to use post-tax dollars to buy it. They make money, the government taxes that money, and then they take the remaining amount to buy what they need.
• When employees buy health insurance through a group plan, they pay for the insurance with pre-tax dollars. That can save them up to 30 to 45% on their health insurance premiums.

4. Healthy Employees = Happy Employees

You might not be able to buy the Beatles’ love, but you can buy your employees’.  

Studies show that small business health insurance plans increase employee loyalty and decrease turnover. There’s scientific proof that purchasing insurance for your employees can increase retention and aid in recruitment.  Mic drop. 

In all seriousness, health insurance is a big deal for both employees and job seekers.  For some, it’s even the deciding 

factor between job offers. 

Providing health insurance, despite not being a large corporate powerhouse, shows how much you value your potential and current employees.  Which – if you’re a good boss – is a lot.

5. And Happy Employees = Happy Boss

You can imagine that an employee with a burst appendix or an inflamed wisdom tooth might be a little distracted when calculating the day’s revenue.  But only a little.

Employees who aren’t provided health insurance have an increased likelihood of avoiding doctor appointments or hospital visits. In short, they have an increased likelihood of being unhealthy.

Additionally, healthy employees means less visits, less appointments, and less sick days.  If you focus on “saving money” at the cost of your employees’ health, we’re tellin’ ya, it’s just going to come back and bite you in the bottom. 

Or your bottom line.

6. The Gift That Keeps on Giving

Cobra isn’t just a snake.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a health insurance program that allows an eligible employee and his or her dependents the continued benefits of health insurance coverage in the case that employee loses his or her job or experiences a reduction of work hours. 

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