Ever heard of an Employer Health Reimbursement Arrangement (QSE HRA)? This new form of HRA is designed to specifically allow small groups, those that do not have 50 FTE, to pay for individual health insurance premiums for their employees. The new rules surrounding the Employer Health Reimbursement are complicated and they are set to go into effect January 1, 2017.
Who can have a QSE/HRA?
Only an employer who does not meet the definition of an applicable large employer under the ACA, and who does not offer coverage to its employees.
What benefits are allowed?
The QSE HRA can pay or reimburse for any documented healthcare expense, as defined in Section 213(d) of the Internal Revenue Code for its eligible employees who are covered on individual health insurance.
The employer must pay 100% of the cost of the benefit to be provided and cannot allow its employees to do pre-tax withholdings or use employee contributions on pre-tax or post-tax basis to pay for the QSE HRA's benefits.
Are there limits?
Yes, the employer can contribute no more than $4,950 for an employee or $10,000 if family member expenses are also to be paid or reimbursed. These limits are expected to increase every year for inflation.
Does the QSE HRA disqualify an individual or household from receiving premium subsidies?
No, but it is much more complicated than that. To understand the potential impact of any QSE HRA on premium subsidies, there will need to be an analysis of:
- What is the net cost of coverage for the employee?
- Is the employer's benefit affordable by comparing the net cost vs. 9.69% of the household income?
- If affordable, employee's household is not eligible for premium subsidies
- If unaffordable, then the subsidy amount would be reduced by the QSE HRA benefit, and the employee would still be responsible for paying their share of the cost of health insurance coverage.
The very good news about the QSE HRA: the plans are not subject to federal continuation (COBRA) or other ERISA rules such as plan and SPD requirements.