Any business can offer ICHRAs, but employees must have individual health insurance coverage to qualify. Employers can adjust contribution amounts based on criteria like full-time vs. part-time status, job classification, or location. ICHRA funds can be used for insurance premiums, medical expenses, or both, depending on the plan design, and special enrollment periods may apply.

In addition, funds are not transportable: they stay with the employer if the employee leaves. However, the health plan purchased with ICHRA funds remains with the employee.

Unused funds can roll over yearly or monthly at the employer’s discretion.

QSEHRAs are available to small businesses with fewer than 50 employees, and reimbursement amounts must be uniform across employees but can vary by family size or age. Contribution limits, set by the IRS, cap the amount an employer can reimburse annually. Employees can use QSEHRA funds for insurance premiums, medical expenses, or both, depending on the plan.

Offering a QSEHRA creates a special enrollment period for employees in the individual insurance market. QSEHRA funds do not transfer if an employee leaves the company. Sharing ministry plans are generally ineligible for QSEHRA, but recent regulations allow reimbursement for medical expenses under certain conditions.

Yes, HRAs can be paired with group health plans, but it depends on the type. Traditional HRAs can sit alongside a group plan. ICHRAs can be offered to certain classes of employees (part time for example), while a group plan is offered to other classes of employees (full time for example). However, this arrangement requires minimum class sizes.

QSEHRAs can not be used alongside group plans. ICHRAs and QSEHRAs require employees to have Minimum Essential Coverage for tax-free reimbursements.

Weak individual insurance markets can limit plan options, raise premiums, and reduce the effectiveness of HRAs for both employers and employees.

Contribution limits may restrict financial support, which becomes particular difficult if the local individual market is not strong. Employers may also face increased administrative complexity. Despite these challenges, HRAs can remain valuable for managing healthcare costs if carefully considered.

If an employer offers an ICHRA, then whether or not an employee can still receive a premium tax credit to help pay for health insurance depends on whether or not that ICHRA is considered “affordable”. Being “affordable” means enough funds are offered to make the second lowest silver plan in the employee’s area cost less than that years “affordability threshold”. The affordability threshold is based on an entire tax households income and varies from year to year. In 2025, the threshold is 9.02%. This means that if the second lowest silver plan available costs less than 9.02% of a households income, it is “affordable”.

If an ICHRA is affordable, no tax credit is available. If it is not affordable, the employee can choose to either receive the tax credit or take the ICHRA, but cannot take both.

For QSHRA, if the amount offered creates an “affordable” offer, then no tax credit is available. However, when a QSEHRA is unaffordable, the employee can receive the funds from the QSEHRA and receive a tax credit. The tax credit is simply reduced by the amount they receive from the QSEHRA.