If you’re a small-business owner and you’d like to reimburse your employees, pre-tax, for the cost of health insurance that they buy on their own, you have two options: An ICHRA (Individual Coverage Health Reimbursement Arrangement) or a QSEHRA (Qualified Small Employer Health Reimbursement Arrangement).1
As long as you have fewer than 50 full-time equivalent (FTE) employees and don’t also offer a group health plan, you have your choice of either an ICHRA or a QSEHRA. Note that only employers with fewer than 50 FTE employees can select a QSHERA.
Read our overviews of ICHRAs and QSEHRAs.
What are the differences between a QSEHRA and an ICHRA?
Here’s a summary of how these two types of health reimbursement arrangements compare, to help you determine which one will be a better fit for your business:
Key differences between ICHRA and QSEHRA |
||
|---|---|---|
| ICHRA | QSEHRA | |
| Eligible employer size | Available to employers of any size.2 | The employer must have fewer than 50 full-time equivalent employees.3 |
| Can the employer also offer a group health plan? | Yes, as long as the ICHRA and group plans are offered to different employee classes.4 | No.3 |
| Are there caps on how much an employer can reimburse? | No, this is up to the employer.4 | Yes. In 2025, reimbursements are capped at $6,350 for a single employee, or $12,800 for an employee with family coverage.5 (Employers can set lower limits.) |
| Can employees use the benefit in addition to a Marketplace subsidy? | No.4 Learn more about Marketplace plan affordability and ICHRAs. | Yes, but the subsidy amount is reduced by the amount of the QSEHRA.6 |
| Do employees get an individual-market special enrollment period when the reimbursement arrangement becomes available to them? | Yes. | Yes. |
| What type of coverage can employees have? | Individual-market coverage or Medicare.4 | Any minimum essential coverage.7 (If it’s a group plan through their spouse’s employer, pre-tax QSEHRA reimbursement is likely not available, because group premiums are typically already paid with pre-tax dollars.)8 |
| Can out-of-pocket medical expenses be reimbursed? | Yes, if allowed by the employer.4 | Yes, if allowed by the employer.3 |
| Are there minimum contribution or participation requirements? | No.9 | No.10 |
| Can different benefits be offered to different employees? | Yes, if you divide your employees into aauthorized classes and offer different benefits to different classes. (If any classes are being offered a traditional group plan instead of an ICHRA, each class must have at least 10 employees.)4 | No, the QSEHRA must be offered on the same terms to all eligible employees. (Employees might receive different reimbursement amounts, depending on the receipts they submit for reimbursement.)10 |
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written hundreds of opinions and educational pieces about the Affordable Care Act for healthinsurance.org.
Footnotes
- “Health Reimbursement Arrangements (HRAs): 3 things to know” HealthCare.gov. Accessed May 20, 2025 ⤶
- “Health Reimbursement Arrangements (HRAs)” and “FAQs on New Health Coverage Options for Employers and Employees” Internal Revenue Service. June 13, 2019. Accessed May 20, 2025 ⤶
- “Notice 2017-67, Qualified Small Employer Health Reimbursement Arrangements” Internal Revenue Service. Accessed May 20, 2025 ⤶ ⤶ ⤶
- “FAQs on New Health Coverage Options for Employers and Employees” Internal Revenue Service. June 13, 2019. Accessed May 20, 2025 ⤶ ⤶ ⤶ ⤶ ⤶ ⤶
- "Revenue Procedure 2024-40" Internal Revenue Service. Accessed May 20, 2025 ⤶
- “Notice 2017-67, Qualified Small Employer Health Reimbursement Arrangements” Internal Revenue Service. And “Qualified Small Employer HRAs (QSEHRAs)” HealthCare.gov. Accessed May 20, 2025 ⤶
- “Notice 2017-67, Qualified Small Employer Health Reimbursement Arrangements” (Appendix A) Internal Revenue Service. Accessed May 20, 2025 ⤶
- “Cures Act – QSEHRA Q&A” Washington Healthplanfinder. Accessed May 20, 2025 ⤶
- “Guide to the individual coverage HRA (ICHRA)” PeopleKeep. Accessed May 20, 2025 ⤶
- “2025 Guide for Qualified Small Employer HRAs (QSEHRA)” Take Command. Accessed May 20, 2025 ⤶ ⤶
