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Introduction
After payroll, the health insurance premium for the employees is the largest cost for many SMBs. To be able to attract and retain top talent, SMBs have to offer health insurance coverage. So they are always looking for cost effective ways of providing health insurance coverage. Most SMBs work with their brokers to evaluate various group health plans. We think QSEHRA which stands for Qualified Small Employer Health Reimbursement Arrangement could be a great option.
In this article we will explain what is QSEHRA and why should SMBs consider QSEHRA as an option to provide health insurance coverage to their employees
What is a QSEHRA?
Let us start by saying what QSEHRA is not. QSEHRA is not a group health plan. A QSEHRA is an arrangement through which an eligible employer reimburses their employees for qualified medical expenses incurred by them or their dependents as defined by law.
It is only available for employers with fewer than 50 full-time employees. To be eligible, the employer must not offer a group health plan or flexible spending arrangement (FSA) to any of its employees and provide the arrangement on the same terms to all full-time employees meaning the reimbursement amount may only vary based on age and the number of individuals covered.
How can employers offer QSEHRA?
To offer QSEHRA to its employees, an employer should take following steps:
- Set the QSEHRA contribution amount
- This is the first step. The employers should decide how much they want to contribute towards their employees health care cost, up to an annual maximum that is set by the IRS.
- According the IRS, the 2022 QSEHRA limits for reimburse are:
- Up to $5,450 of qualified medical expenses per year (or $454.16 per month) for employee-only coverage, or
- Up to $11,050 per year (or $920.83 per month) for family coverage.
- Employers should give a written notice to their employees 90 days before the beginning of each plan year for current employees.
- Employees must purchase health insurance coverage in the individual market that provides minimum essential coverage(MEC). The employees can purchase this coverage from Obamacare Exchanges or going directly to the website of different health insurance carriers or with the help of brokers.
- Employees provide proof of coverage to their employers. After that employees can submit the receipts of qualified medical expenses which includes the premium for the health insurance coverage they purchased in the individual market, to their employers for reimbursements. The employer will reimburse the employee in tax-free dollars, for the expenses incurred up to the contribution amount set as per the IRS limit.
Why QSEHRA could be the best choice for SMBs?
- Group health plans could be expensive for very small employers
- If you are a very small employer, let us say less than 10 employees, it is very expensive to buy a group health plan. You are much better off setting up a QSEHRA where employees purchase the coverage in the individual market and you reimburse the cost of the premium and other eligible medical expenses
- Group health plans limit choice
- Employees’ healthcare needs vary a lot. Some are healthy and rarely visit the doctors office; others may have needs for very expensive medical surgery. In the group coverage, you are invariably limiting the choice by asking your employees to pick from a few options that you have chosen for the company. In a QSEHRA, you are giving your employees the option to purchase the health insurance coverage that best meets their individual needs.
- Money stays with the employer until an employee makes a claim
- Unlike group health plans, where the employer has to pay the premium to the carrier every month irrespective of whether its employees are using the healthcare system, in case of QSEHRA, the employer pays (reimburses) to the employee only when a qualified claim is submitted by the employee. Otherwise the funds stay with the employer.
At any point in time if you feel like connecting with us in this respect, our team is there to help. You can use the link below to book a call with us.
Conclusion
For small businesses looking to offer cost-effective health insurance to their employees, a QSEHRA could be a great option. Not only does it allow employees to choose the coverage that best suits their needs, but it also gives them tax-free money to help cover the costs. Plus, there’s no need to worry about health insurance premiums increasing; with a QSEHRA, you set your own budget each year.
