What is a QSEHRA?
What does an employer who wants to help their employees with their health insurance, but isn’t quite ready to jump into the group benefits pool just yet, do?
Some employers just “wage up” or give a stipend to their employees to help offset the cost of health insurance. In some cases, this may not affect their tax situation.
However, in other scenarios, it could have serious consequences on an employee’s eligibility for assistance with their marketplace plan.
If an employee receives a stipend of $300/month to help with premium, it looks like their income is higher. But, it’s actually not.
That extra $3600 is supposed to be used for medical insurance.
The QSEHRA might be a great place to start. QSEHRA stands for Qualified Small Employer Health Reimbursement Arrangement.
In a nutshell, it allows you to help your employee with their premium on an individual plan … without compromising their eligibility for a subsidy.
How it works
As the employer, you need to determine what you are willing/able to offer your staff. Is it $50/month toward the cost of their insurance? Maybe 300? Or, somewhere in between?
Once you have that amount determined, we will need a third-party administrator. They will handle everything seamlessly and make sure the program stays compliant.
Your employee enrolls in a health plan during Open Enrollment or when they have a qualifying event, like get married or divorced, have a child, etc.
If they fall in a certain income bracket, they may be eligible for assistance from the federal government to help offset the cost of premium.
Each month, when the employee pays their premium, they submit their receipts to the TPA either online or through an app for reimbursement.
The key to the QSEHRA is that it happens on a reimbursement basis. That is how it doesn’t affect the subsidy eligibility from the government.
Have a question? Let me know!