After the 21st Century Cures Act passed in 2016, small businesses nationwide adopted the qualified small employer health reimbursement arrangement (QSEHRA) as a vehicle for offering personalized health benefits.
Though the QSEHRA is available to all businesses with fewer than 50 employees, data from PeopleKeep—available for free in The QSEHRA: Annual Report 2018—identifies clear trends across the country in terms of which businesses adopted the QSEHRA, the size of employee allowances, and how employees used the benefit.
In this post, we’ll explore excerpts from the Annual Report to examine how QSEHRA varied by state in 2017. For more information, download the Annual Report and check out our QSEHRA state-by-state guide.
Which states used the QSEHRA?
Businesses using the QSEHRA are overwhelmingly located in the western and southern United States, representing 34 percent and 31 percent of the total sample, respectively.
Businesses in the Midwest make up 19 percent of the sample, followed by businesses in the Northeast at 16 percent.
States where the QSEHRA was most popular include California, which made up 15 percent of the total sample; Colorado (7 percent); Florida (7 percent); New York (6 percent); and Texas (6 percent).
Which states gave the highest and lowest allowance amounts?
In 2017, businesses could grant annual allowances of up to $4,950 ($412.50 monthly) for self-only employees and $10,000 ($833.33 monthly) for employees with a family.
Nationwide, the average monthly employee allowance was $386.55. By family status, average allowances were $280.20 for single employees and $476.56 for employees with a family. Twenty-seven percent of self-only employees and 32 percent of employees with a family received the maximum monthly allowances of $412.50 and $833.33, respectively.
Allowance averages also varied by U.S. region and state.
Regionally, businesses in the Northeast gave the highest average allowances—likely due to the region’s higher cost of living. These average allowances were: $425.64 in the Northeast, $389.46 in the Midwest, $389.02 in the South, and $386.73 in the West.
By state, allowances varied more significantly. In 2017, states offering the highest average monthly allowances were South Dakota ($833.33), Connecticut ($638.22), West Virginia ($648.48), Delaware ($564.06), and Maine ($536.36). At the lower end of the spectrum are Iowa ($166.67), Oklahoma ($180.36), Idaho ($208.96), Arizona ($221.74), and New Mexico ($237.50).
Which states used the most and the least of their QSEHRA allowances?
The QSEHRA allowance represents the business’s maximum expense. However, the actual cost to the business depends on how much of their allowance eligible employees actually use.
For example, if an employee has an allowance of $400 per month ($4,800 per year) and their approved expenses are $300 per month ($3,600 per year), they’ll be reimbursed $300 per month ($3,600 per year) for a utilization rate of 75 percent. Conversely, if the same employee has approved expenses of $450 per month ($5,400 per year), they’ll be reimbursed only up to their maximum allowance of $400 per month ($4,800 per year). Under this scenario, the employee is utilizing 100 percent of the allowance.
In the first example, the unused $100 per month remains with the business, reducing the overall cost of providing health benefits to the employee. In the second example, the employee uses their entire allowance, and the remaining $50 per month is their responsibility.
The average utilization rate for the QSEHRA—among employees who submitted at least one expense for reimbursement—is quite high. Nationally, the average utilization rate in 2017 was 78 percent across all family sizes.
By state, average allowances played a significant role in differing utilization rates. New Mexico, for example, offered among the lowest average monthly allowance at $260.71. It’s unsurprising, then, that New Mexico also had one of the country’s highest utilization rates at 96 percent.
This is also true of Idaho (an average monthly allowance of $297.68 and an average utilization rate of 84 percent), Oregon (an average monthly allowance of $312.55 and an average utilization rate of 83 percent), and Missouri (an average monthly allowance of $313.33 and an average utilization rate of 86 percent).
On the other end of the spectrum, states with higher average monthly allowances had lower average utilization rates: West Virginia had an average monthly allowance of $648.48 and an average utilization rate of 76 percent, Michigan had an average monthly allowance of $535.87 and an average utilization rate of 76 percent, and Arizona had an average monthly allowance of $477.61 and an average utilization rate of 60 percent.
Geography played a significant role in determining whether a business offered a QSEHRA, how much a business gave in monthly allowances, and how employees used their benefit.
Check out more state-specific information in the PeopleKeep QSEHRA state-by-state guide, and be sure to download The QSEHRA: Annual Report 2018. You can also check out our 2018 annual report webinar on demand. In the webinar, we review the report’s findings and discuss how you can apply them.