The QSEHRA is just one health benefits option available to small businesses, but for those who can’t afford traditional group health insurance, it’s the best.
The QSEHRA vs. group health insurance
One of the primary reasons small businesses choose to offer a QSEHRA is cost. They’re often unable to afford traditional group health insurance, so they look for an option that helps them keep control over their budget.
Kaiser Family Foundation data shows that small businesses that offered a group health insurance policy spent an average $455 per employee per month in 2017 for single coverage and $900 per employee per month for family coverage.
Small businesses that offered a QSEHRA, though, committed to an average $297 per month per self-only employee and $445 per month per employee with a family. That’s a cost reduction of 38 percent and 47 percent, respectively, assuming all employees use 100 percent of their allowance.
Additionally, small businesses using a QSEHRA provided employees value outside of an insurance policy.
While a group policy only provides insurance coverage, the QSEHRA provided reimbursement for nonpremium expenses to more than a quarter (27 percent) of employees who accessed at least part of their benefit.
Employees covered under a QSEHRA also chose their own insurance coverage—something not possible under a group health benefit.
Finally, businesses who choose a QSEHRA administration tool like PeopleKeep to help them offer the benefit spend an average 15 minutes per month administering health benefits, compared with the average 13 hours businesses spend administering group health insurance.
For more information, check out “Is group health insurance the best choice for small business?” and "The QSEHRA: pros and cons."
The QSEHRA vs. health insurance stipends
One way for small businesses to help employees cover health costs is to offer a health insurance stipend, which is simply extra money in an employee’s paycheck. This stipend is the equivalent of grossing up wages—it is a flat amount given to all employees, which they can spend however they choose.
While a health insurance stipend requires no administration, it is an informal solution to a formal problem.
Employees rarely consider the extra cash a “benefit,” and therefore rarely put the funds toward their health needs. Additionally, both businesses and employees are paying a combined 35 percent more in taxes on average than they would with a formal solution like the QSEHRA.
The QSEHRA vs. other HRAs
The QSEHRA isn’t the first or only health reimbursement benefit.
It was modeled on the old stand-alone HRA that was widely used before 2014, when the IRS and the Departments of Labor and Health and Human Services issued guidance that seriously limited it.
Businesses currently have the choice of three HRAs: the QSEHRA, the integrated HRA (an HRA used in conjunction with an ACA-compliant group health policy), and a one-person stand-alone HRA (an HRA that covers just one employee).
Here’s a table to help distinguish all four HRAs.