Who is the QSEHRA Designed For?

One of the most important benefits a company can provide their employees is health insurance.  However, many small businesses just simply cannot afford to offer a group health policy to their employees.  But in 2017, a new option was put into law with the QSEHRA.  The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) allows employers to reimburse their employees, who maintain minimum essential coverage (MEC), for their qualified health insurance premiums or qualified health care expenses.  This plan allows employers the means to help employees pay for their personal health plan costs, in turn providing more affordable health care.

The BASE® QSEHRA is for businesses who want to offer a compliant health benefit when providing insurance is no longer an option.   

Who is the QSEHRA designed for?

For businesses…

The QSEHRA is designed for any business, with less than 50 full-time employees, who do not offer a group health plan to any employees. 

For employees…

The QSEHRA is designed for any full-time employee, and their families. 

How is the QSEHRA designed and how much can be saved?

A QSEHRA is designed to have an employee purchase their own insurance on or off the marketplace and then to be reimbursed by their employer for that expense.  To see how much can be saved, let’s check out a QSEHRA example: the employer, Dane with Southwest Towing, has chosen to sponsor a QSEHRA and has 10 employees. 

To see how much his employees can save with the QSEHRA, let’s first look into what the cost is for just one employee with a Qualified Subsidy without the QSEHRA.  The monthly cost for the Silver Plan on the Exchange is $500 a month, $6,000 annually.  The employee only receives $150 monthly, $1,800 annually with the Premium Tax Credit.  With the $500 monthly premium to be enrolled in the Silver Plan on the Exchange and the $150 Premium Tax Credit, the employee will still have to pay $350 a month, $4,200 annually for their health premiums.

Next, let’s look at Dane’s employees with the QSEHRA.  Dane has decided to reimburse each employee the annual maximum of $5,450.  For one employee with the Employer-Sponsored QSEHRA, the Silver Plan on the Exchange is still a $500 a month premium, $6,000 annually.  The employee receives $454 a month with the QSEHRA that equals $5,448 annually.  With taking the $500 monthly to be enrolled in the Silver Plan on the Exchange and the $454 QSEHRA, the employee will have to pay $46 a month, $552 annually for their health premiums.

Dane’s employees are looking at saving $304 a month on premiums, $3,648 annually by Dane offering the BASE® QSEHRA.

The businesses that participate in the QSEHRA can deduct 100% of all reimbursements to employees as a business deduction, set a budget or allowance caps, giving more control and predictability, over health care costs.  The employers can attract and retain employees with an expanded business package and have peace of mind knowing that all the legal and administrative procedures are handled by BASE®.   Participants in the QSEHRA, now have additional money to help with the rising cost of health care and have more options and flexibility with their choice of health care.  The employees have the choice to secure the right type of health care coverage that works best for them on or off the Marketplace. 

Contact BASE® at 888.386.9680 or visit www.BASEonline.com for more information on the Qualified Small Employer HRA. 

ICHRA vs. Giving Raises: Why Offer the HRA Over Giving Raises?

Many businesses that do not currently offer health benefits often consider giving their employees raises to compensate.  They might be choosing a raise without being armed with all the facts of why this isn’t necessarily the best option in the long run. 

“Should employers give their employees a raise or offer them the Individual Coverage HRA?”

The Individual Coverage Health Reimbursement Arrangement (ICHRA) is a tax-savings plan that gives employers a great alternative when providing health benefits.  It allows employers to reimburse employees, tax-free, for qualified health care costs, choosing to offer to all employees, or to a specific class, with no contribution caps. 

The BASE® ICHRA is available to businesses of all sizes looking to streamline benefit options and cut costs without reducing the value of health benefits to their employees. 

Here are 4 reasons why offering a raise is not always the best option:

  1. The employer pays taxes on the raise. For example, if the employer wanted to offer their employees an annual raise of $300 per month, it will cost the employer $322.95 per month when factoring in the 7.65% payroll tax.  At the end of the year, the employer will be spending $3,875.40 just to offer their employee a raise of $3,600 for the year. 
  2. Employees pay taxes on the raise as well. For example, the employee is single, makes $35,000+ a year, the employee would have to pay $1,175.40 of the $3,600 raise in taxes.  At the end of the year, the employer is spending the same $3,875.40 to offer their employees a take-home pay of $2,424.60. 
  3. Extra income could be spent on expenses other than health care. That extra money the employer offers could easily be spent on other expenses and not towards the purchase of health insurance. 
  4. Retention value is lost. While an employer’s intent is to provide a health benefit through the raise, employees may not see it that way as time passes, which leaves an employer vulnerable to employees looking elsewhere for a job providing health benefits. 

 Instead of the raise, employers can offer the ICHRA and this will:

  • Allow employers to set a budget
  • Create some health care predictability
  • Allow employers to offer a medical benefit without paying group benefit rates

 The best part about offering the ICHRA over a raise?  The reimbursements are:

  • Tax deductible to the business
  • 100% tax-free to the employees

According to the US Department of Health & Human Services, Labor and Treasury estimate, between 2020-2029 approximately 7 million people will shift from group to individual coverage and 800,000 employers will offer an ICHRA.  With the ICHRA gaining interest, employers are starting to think about what the best option really is. 

In the end, giving a raise may seem like the best option right away, but with a 20-30% increase of ICHRAs anticipated over the next 10 years, the ICHRA will be the best option in the long run.  Let BASE® provide the information about how the ICHRA can be the best option for your business in the long run.  Call 1-888-386-9680 to learn more about the ICHRA today or visit www.BASEonline.com!