One of the biggest advantages of working for a company that offers a qualified small employer health reimbursement arrangement (QSEHRA) is the opportunity to get reimbursed for your individual insurance premiums.
You don’t need an insurance policy to participate in the QSEHRA—or to be reimbursed for other eligible medical expenses—but having one is helpful. Besides the obvious advantages of being insured, having major medical coverage—or minimum essential coverage (MEC)—entitles you to tax-free reimbursement of all QSEHRA-eligible expenses.
While it’s possible to get MEC in other ways (through a spouse’s group insurance policy, for example), many QSEHRA participants gain qualifying coverage through an individual insurance policy.
If you don’t already have an individual insurance policy, you’ll need to purchase one and attest to that purchase to start getting tax-free reimbursement of your premium payments and other medical expenses.
Unfortunately, simply becoming eligible for a QSEHRA doesn’t entitle you to a Special Enrollment Period (SEP)*. If your company implements a QSEHRA outside of the open enrollment period, you’ll need a qualifying life event to purchase an individual insurance policy.
In this post, we’ll go over qualifying life events, how to verify them through your local exchange, and how to use that policy to access tax-free reimbursement through the QSEHRA.
*This is true in all states except Minnesota. In Minnesota, becoming eligible for a QSEHRA opens a special enrollment period.
What Is a Qualifying Life Event and Why Do I Need One?
The Affordable Care Act (ACA) created the open enrollment period to prevent people from enrolling in insurance only when they get sick. During open enrollment, anyone can apply for insurance and be approved.
If you want to purchase insurance outside that window, however, you’ll need a qualifying life event. A qualifying life event opens an SEP, which grants you an amount of time—generally 60 days—to purchase an individual policy on your local exchange.
The ACA defines several qualifying life events. You can find a complete list here, but some common examples of qualifying life events are:
- Losing job-based health insurance.
- Turning 26 and losing coverage through a parent.
- Getting divorced or legally separated and losing health insurance.
- Getting married.
- Having a baby, adopting a child, or placing a child for foster care.
- Moving to a new home in a new zip code or county.
- Experiencing changes that make you no longer eligible for Medicaid or CHIP.
Applying for an SEP and Shopping for a Policy
If you have a qualifying life event, you can apply online for an SEP through HealthCare.gov or your state exchange.
The exchange will ask you a few questions about your qualifying life event. If you’re determined to be eligible, you’ll be taken to a screen that gives details and instructions on the documents you’ll need to submit to verify the qualifying life event. In some cases, though, you may not need to provide anything at all.
After you’ve reached the eligibility results screen, you should start an application for insurance coverage. Though you’ll need to submit your verifying documents, HealthCare.gov advises you to choose an individual policy first.
When you shop for a policy, be sure to keep your QSEHRA allowance amount in mind. That monthly allowance can go toward your premium as well as any other medical expenses, and you can use the figure in your budgetary calculations.
You can also ask for an insurance broker’s assistance in choosing an individual policy. If your employer uses a software-as-a-service (SaaS) platform like PeopleKeep, you’ll likely also receive assistance from the platform.
Once you choose and apply for a policy, you’ll have 30 days to submit the verifying documents.
Verifying Your Qualifying Life Event
The documentation you’ll be asked to submit depends on your qualifying life event.
Below, we’ll walk you through some common qualifying life events and the required documentation for each. For full information on document guidelines, visit HealthCare.gov.
- A marriage certificate showing the date of marriage
- A marriage license showing the date of marriage
- An official public record of the marriage, including a foreign record of marriage
Divorce or legal separation
- Divorce or annulment papers, including the ending of health care responsibility and proof of prior qualifying health coverage within the last 60 days
- A birth certificate or application for a birth certificate
- A foreign birth record with the child’s date and place of birth
- A military record showing the child’s date and place of birth
- A religious record showing the child’s date and place of birth
- A letter from a hospital, clinic, physician, or other medical provider attesting to the child’s date of birth
- A medical record from a hospital, clinic, midwife, institution, or other medical facility showing the child’s date of birth
- Documentation from a health insurance company showing services related to birth, along with the reason you can’t provide other documentation
Adoption and legal guardianship
- An adoption letter or record showing date of adoption signed and dated by a court official
- A government-issued or legal document showing legal guardianship was established or that the child was placed in a home, including the date it occurred
Turning 26 and losing coverage through a parent
- Proof of prior qualifying health coverage within the past 60 days
Loss of job-based coverage
- A letter or document from your company verifying the company changed, dropped, or will drop coverage for you, your spouse, or your dependents, along with the date coverage ended or will end
- A letter from your health insurance company showing the date coverage ended or will end
- Proof of prior qualifying health coverage within the past 60 days
- A dated and signed copy of written verification from a health insurance broker, or a dated letter from your health insurance company showing your policy’s cancellation
Death of a policyholder
- A death certificate or a public notice of death, along with proof of prior qualifying coverage within the past 60 days
Moving into a new area
Proof of prior qualifying health coverage within the past 60 days, along with:
- Lease or rental agreement
- Mortgage deed showing you use the property as a primary residence
- An insurance document like homeowners, renters, or life insurance policy
- Mail from the Secretary of State, driver’s license, vehicle registration, state ID, or change of address card
- A USPS change of address form
- Mail from a government agency
- A state ID
- Official school documentation
- Mail from a financial institution, like your bank
- A pay stub with your residential address
- A letter from your company stating that you relocated for work
- A voter registration card showing your name and address
- A contract with your moving company showing your address
- A letter from a local nonprofit social services provider or government entity that can verify you live there
- A letter or statement that you’re living in another person’s house, including their proof of residency
- A green card, education certificate, or visa if you moved to the United States from another country
When you’re ready to submit the documents, upload them to HealthCare.gov or send photocopies of the originals to:
Health Insurance Marketplace
Attn: Supporting Documentation
465 Industrial Blvd.
London, KY 40750-0001
Verifying MEC and Receiving Premium Reimbursement Through Your QSEHRA Provider
Once you’ve obtained an individual insurance policy, you can have your premium payments reimbursed through your company’s QSEHRA. You can also receive all QSEHRA reimbursements tax-free.
To access to those benefits, you’ll need to attest that you have major medical coverage and submit verification of your premium expenses.
While your company may operate these processes differently, attesting that you have MEC requires you to state that you have major medical coverage. Your company or QSEHRA provider may ask you to provide verification, but regulations—and solutions like PeopleKeep—don’t require it. Ultimately, it’s up to you to ensure you’re categorizing QSEHRA reimbursements fairly and paying the appropriate taxes.
To receive premium reimbursements for your policy, you’ll need to provide more verification. How you do this will depend on your company or QSEHRA provider. In general, though, you’ll need to submit documentation showing the cost of your premium and how often it’s charged. Most of the time, the best way to verify this is by submitting relevant portions of your individual policy documents.
Once your company has verified this information, you’ll receive premium reimbursements each month. IRB 2006-31 allows employees to receive these reimbursements automatically, without further review of recurring expenses, so you’ll need to go through this process only once.
However, if you drop or change coverage during the plan year, you’re responsible for updating your company or QSEHRA provider appropriately.
If You Don’t Have a Qualifying Life Event
If you don’t have a qualifying life event, you’ll need to wait for the next open enrollment period to purchase an individual policy.
But that doesn’t mean the QSEHRA is useless. As previously mentioned, the QSEHRA can reimburse participants for a number of things outside of individual insurance premiums (for a full list, click here).
You don’t need to have insurance to submit these items for reimbursement. The only thing you need to do is keep track of these reimbursement amounts and count them as part of your gross income when you file taxes.
Once you obtain individual insurance, you won’t need to do this anymore. All QSEHRA reimbursements made while you have major medical insurance are tax-free.
The QSEHRA provides the most value to participants when they have major medical insurance. If you don’t already have insurance, whether through a current individual policy or a spouse’s group policy, you’ll need to purchase coverage.
If you have a qualifying life event, you can do this right away through an SEP. The process for obtaining coverage and submitting it for reimbursement through the QSEHRA is simple, and—once accomplished—entitles you to tax-free reimbursement for all your qualified medical expenses.