The QSEHRA: Proceed With Caution

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​The new QSEHRA sounds like a boon for small employers, but buyer beware, this isn't a plan for everyone.

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​In 2014, rules governing Health Reimbursement Arrangements (HRAs) tightened.  To participate in an HRA that covers unreimbursed medical claims, an employee must be covered under a group medical plan.  This could include the employer’s own group plan, or if an employer allowed, a spouse’s or parent’s plan.  The new rules explicitly barred HRA dollars from being used to pay for individual medical coverage.  The end result?  A reduction in the number of stand-alone HRA plans.  

​The 21st Century Cures Act now provides a “cure” – the QSEHRA (pronounced either cue-sar-ah or quasi-h-r-a).  Starting in 2017, small employers (less than 50 employees) are now permitted to offer this Qualified Small Employer HRA program, with lots more rules attached. More letters = more rules apparently.
 
Will the industry need to quickly ramp up for the droves of small employers racing to implement the newly minted QSEHRA?  Well…not so fast. 
 
The premise of this program is admirable -- to help small employers provide assistance to employees to help them offset healthcare insurance premiums, in lieu of offering a group medical plan.  And, according to the Kaiser Foundation, with only 25% of small employers in Washington State offering health insurance coverage, this new program would seem to be a widely-embraced gift to small employers.
 
If it sounds too good to be true...
 
Unfortunately, two of the rules throw a wrench into the bike spokes: 1) the QSEHRA amount could disqualify an employee (and possibly his or her entire family) from receiving Federal premium subsidies, and 2) if the employee does still qualify, the subsidy will be reduced dollar-for-dollar by the employer’s QSEHRA. 
 
Who would offer these plans?  Employers whose full-time employees are high income earners (since they already would not be eligible for Federal subsidies), and those where employees are eligible for a spouse or parent’s plan (again, already making them ineligible for subsidies).  After all, why would an employer want to provide employees with dollars that will just be siphoned off, dollar-for-dollar, by the Federal government?
 
What should you do?
 
Take the time to familiarize yourself with all the new rules and requirements.  Read our spec sheet for more plan information, as well as a list of “we just don’t know yet” questions to be aware of. Then, for all your small employers, you will want to really understand their employee topography before implementing a QSEHRA.  And if they proceed, you will want to advise them to work with a plan administrator to make sure all the requirements are met. 
 
The caution flag is still flying on this one.