HRAs: QSEHRA and ICHRA
Health reimbursement arrangements as an alternative to a group plan: the QSEHRA for small employers, the ICHRA for any size.
A health reimbursement arrangement is the employer's promise to reimburse employees' medical costs, up to an amount it chooses, tax-free. Employees put nothing in. Instead of buying one group plan for everyone, the company can give each employee a budget for the coverage they buy themselves. Two kinds matter to a startup: the QSEHRA and the individual coverage HRA.
- AllowanceThe employer sets the amount, by class
- CoverageThe employee buys their own coverage
- ClaimProof of coverage and of the expense
- ReimbursementTax-free, from the employer
Group health plan
- Good at
- Familiar to employees
- Employee share pre-tax under §125
- Watch for
- Participation minimums
- The employer is buying insurance, not a budget
- Best for
- A team in one area that wants one network
QSEHRA
- Good at
- Simple to run
- Reimbursements tax-free when the employee has minimum essential coverage
- Watch for
- Capped: $6,450 self-only for 2026
- Not for ALEs, and not alongside a group health plan
- Best for
- A small company with no group plan and a modest budget
ICHRA
- Good at
- No federal dollar cap
- Different amounts for different classes of employee
- Watch for
- Employees must buy individual coverage
- Never offered to a class that is offered the group plan
- Best for
- Employers of any size, especially with staff spread across states
In this lesson: the QSEHRA, with its limits and notice; and the ICHRA, with its classes and its place in the employer mandate.
Pages in this lesson
2 pages go deeper, about 12 minutes in all. Read them in order, or open the one you need.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Background reading explains; it is never the authority for a rule. Anything marked as a convention is ours, not the rule-maker's.
- Federal statute
- IRC §9831(d) (opens in a new tab)Qualified small employer health reimbursement arrangementsFree to read
- IRS guidance
- Rev. Proc. 2025-19, §2.01–.02 (opens in a new tab)2026 HSA limits, HDHP minimums and the excepted benefit HRAPDF · Free to read
- Federal agency guidance
- DOL, HHS & Treasury — FAQs on New Health Coverage Options for Employers and Employees, Q5, Q6, Q10 (opens in a new tab)Individual coverage HRAsPDF · Free to read
- Background reading — not an authority
- Wikipedia, “Health reimbursement account” (opens in a new tab)Health reimbursement accountFree to read
The words this lesson teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.
- Health reimbursement arrangementAn employer-funded promise to reimburse employees' medical expenses, tax-free, up to an amount the employer sets. Employees cannot contribute. QSEHRAs, individual coverage HRAs and excepted benefit HRAs are the kinds a small employer meets
- Qualified small employer HRAAn HRA for an employer that is not an ALE and offers no group health plan, reimbursing employees with their own minimum essential coverage, on the same terms for all — up to $6,450 self-only and $13,100 family for 2026, with written notice 90 days before the year
- Individual coverage HRAAn HRA, open to employers of any size, that reimburses individual health insurance premiums and costs with no federal dollar cap, offered on the same terms within each class of employees — and never to a class that is offered the group plan