What Is QSEHRA
A QSEHRA (Qualified Small Employer Health Reimbursement Arrangement) is a tax-favored benefit that lets small employers with fewer than 50 employees reimburse workers for individual health insurance premiums and out-of-pocket medical costs. Unlike traditional group health plans, QSEHRAs allow employees to buy their own coverage on the individual market (including through Healthcare.gov) and get reimbursed by their employer up to an annual limit set by the IRS. For 2024, the maximum annual reimbursement is $6,150 for self-only coverage and $12,500 for family coverage.
How QSEHRA Affects Government Benefits
If you're applying for government assistance programs, QSEHRA reimbursements count as income for most means-tested benefits. This matters directly for eligibility calculations on SNAP, Medicaid, TANF, and WIC programs. The IRS treats QSEHRA reimbursements as taxable income on your W-2, which increases your reported annual income when you apply.
For Medicaid eligibility, your modified adjusted gross income (MAGI) includes these reimbursements, potentially pushing you over income thresholds in your state. The federal poverty line for 2024 is $15,060 for an individual and $31,200 for a family of four. SNAP income limits are 130 percent of poverty (about $19,578 for an individual), and TANF limits vary by state but typically range from 130 to 200 percent of poverty. WIC income limits are 185 percent of poverty ($27,861 for an individual).
Key Operational Details
- Employers must offer QSEHRAs uniformly to all employees working 30 or more hours per week
- Employees can decline the QSEHRA and keep subsidies on Healthcare.gov if they buy individual coverage there instead
- QSEHRA funds are pre-tax, reducing your taxable income but increasing income counted for means-tested benefit calculations
- Unused reimbursement funds carry over to the next year, unlike health savings accounts (HSAs)
- Employers must provide written notice of the QSEHRA at least 90 days before the plan year begins
Comparing HRAs and Other Arrangements
QSEHRAs are one type of HRA. The key difference from other HRAs is that QSEHRAs specifically reimburse individual health insurance rather than group coverage expenses. Another option for small employers is the ICHRA (Individual Coverage HRA), which works similarly but has different nondiscrimination rules and allows employers of any size. A Small Employer with 50 or more employees cannot offer a QSEHRA and must provide group coverage instead.
Common Questions
- Does a QSEHRA reimbursement reduce my SNAP benefits? Yes. The reimbursement counts as earned income on your application. If you're receiving SNAP based on a lower reported income, adding a QSEHRA reimbursement may reduce or eliminate your benefits depending on your state's income threshold and your household size.
- Can I get a Healthcare.gov subsidy and a QSEHRA at the same time? Not typically. If your employer offers a QSEHRA, you're usually ineligible for premium tax credits on Healthcare.gov even if you decline the QSEHRA. This is called the "offer rule." You can waive the employer's reimbursement in writing and potentially keep subsidy eligibility, but rules vary by plan year.
- Does a QSEHRA count toward my modified adjusted gross income for Medicaid? Yes. When you apply for Medicaid, the QSEHRA reimbursement increases your MAGI, which determines your income-based eligibility. In many states, this can disqualify you even if you'd qualify without it.