What Are the Differences Between Traditional Medical Plans, ICHRA, and QSEHRA?

As a small business owner, you care about offering the right benefits to your employees. Plus, if they also benefit you, that’s a great bonus.

At CSI Accounting & Payroll, we’ve worked with small businesses for over 50 years. We know a thing or two about employee benefits!

When it comes to medical plans, you may have heard a few things about ICHRA and QSEHRA as options. Let’s take a deeper look at what ICHRA and QSEHRA are and the differences between them and a traditional medical plan benefit.

ICHRA vs. QSEHRA Plans

ICHRA and QSEHRA are both HRAs – Healthcare Reimbursement Arrangements. Your employee spends money on healthcare, and you reimburse them for it, tax-free. That’s what makes it a great tax benefit for both you and your employees!

ICHRA (Individual Coverage HRA)

This is mostly used for larger businesses, meaning you have more than 50 full-time employees. However, you can still use it as a smaller business. It includes these major benefits:

• ICHRA can be used in addition to a group medical plan for your business.
• There is no annual contribution limit set by the IRS.
• There are different coverage classes for employees.

This is often the preferred choice over QSEHRA due to these benefits and flexibility.

QSEHRA (Qualified Small Employer HRA)

QSEHRA is fairly similar to ICHRA. It’s only used for small businesses, meaning you have fewer than 50 full-time employees. Unlike ICHRA, it has these downsides:

• You can’t use QSEHRA if you also have a group medical plan for your business.
• There is an annual contribution limit set by the IRS.
• The coverage is uniform for all employees.

While this plan doesn’t sound as appealing, it does have a couple of benefits over ICHRA: 

• It can be used by an employee who is on their spouse’s medical plan.
• It can be used with alternative healthcare plans and Minimum Essential Coverage (MEC) under the Affordable Care Act (ACA).

HRA Plans vs. Traditional Medical Plans

Now that you know about ICHRA and QSEHRA, you’ll probably want to know more about how HRAs are different from traditional medical plans. The major difference is that HRAs are not done through a group health plan, which would typically be offered (with a few plan options) to all of your employees.

With HRAs, the employee can go get their own coverage and have more flexibility in what plans to choose from. After any out-of-pocket costs, they turn in their receipts to the administrator who will report to you how much to reimburse the employee.

Offer Your Employees the Best Benefits

Now that you know about the differences between ICHRA, QSEHRA, and a traditional medical plan benefit, are you ready to start an ICHRA or QSEHRA plan through your payroll provider?

If so, please consider CSI Accounting & Payroll! We can refer you to a specialized administrator who will start the plan for you for their fee, then we can set it up in our payroll software so it’s handled correctly and doesn’t get taxed.

To see if we can be a good fit for your business, click the button below for a free consultation:

Not ready to talk? That’s okay! First, learn more about how to offer benefits to your employees.