The short answer
Small employers who don't want the cost and hassle of a traditional group health plan have another option: reimburse employees tax-free for individual coverage they buy themselves, through a health reimbursement arrangement (HRA). The two main types are QSEHRA (for small employers) and ICHRA (available to employers of any size). Both let you give employees money for premiums and medical costs without running a group plan.
So instead of picking one group plan for everyone, you fund each employee's own coverage — often simpler and more predictable for a small business.
How QSEHRA and ICHRA differ
QSEHRA is designed for businesses with fewer than 50 employees that don't offer a group plan. It has annual contribution limits set by the IRS and must be offered on the same terms to eligible employees. ICHRA has no company-size limit and no set contribution cap, and it lets you vary allowances by employee class (like full-time vs. part-time), giving more flexibility — but it comes with more design rules.
In short: QSEHRA is simpler with caps for small employers; ICHRA is more flexible and scalable. Our self-employed and small business coverage overview covers the landscape.
Which fits your business
A very small business wanting simplicity often likes QSEHRA; a business that wants to vary contributions or has more employees may prefer ICHRA. Either way, employees use the allowance toward an individual plan (often from the Marketplace), and the reimbursement is tax-advantaged. One note: how an HRA interacts with an employee's ACA subsidy depends on whether the allowance is considered affordable.
Because the setup and compliance details matter, it's worth a conversation to pick the right structure. Reach out through our contact page to talk through which HRA fits your team.
Frequently Asked Questions
What's the difference between QSEHRA and ICHRA?
QSEHRA is for employers with fewer than 50 employees, with IRS-set contribution caps. ICHRA works for any size employer, has no set cap, and lets you vary allowances by employee class — more flexible but with more rules.
How does an HRA help a small business?
It lets you reimburse employees tax-free for individual health coverage they buy themselves, instead of running a group plan — often simpler and more cost-predictable for a small business.
Can employees still get an ACA subsidy with an HRA?
It depends on whether the HRA allowance is considered affordable. If it is, they generally take the HRA; if not, the interaction with subsidies changes. It's worth reviewing with an advisor.
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