Small businesses are always looking for ways to offer their employees health benefits. But most group health care plans are not able to cater to an employee’s individual needs. These insurance plans also need upfront payment, even if your employee never claims one. They are expensive and you have to pay even if your employees are not using them.
These options leave small business owners with little choice and they usually abandon the idea of offering health benefits to their employees. But not anymore, “QSEHRA” or “Qualified Small Employer Health Reimbursement Arrangement” is offering a new and more efficient way to cover the health expenses of your small business employees.
QSEHRA works on the mechanism of reimbursements. You as an employer have to set the limit of reimbursements. Then your employee will choose a health plan according to their preferences. The employee will provide proof of the expense and get reimbursed up to the limit set by you.
The concept of using reimbursements is to provide the payments without a tax cut. Employees either pay to their doctor or the insurance company and then get reimbursed once their claim is accepted – tax-free.
“HRA” stands for Health Reimbursement Arrangement. This means that the business does not have to pay in advance. They will only pay once their employee submits a claim or else the money will stay with the employer.
- Group health plans/insurance provide the same benefits to all employees and they are chosen by the employer. Sometimes these do not cover the individual medical needs of a certain employee.
However, an HRA gives an employee a lot more freedom. The employer sets a compensation limit and the employee can choose a plan according to their needs. This way the employee gets more options and flexibility..
- QSEHRA is better for you tax-wise. Reimbursements count as tax-cuts. The employer is not required to pay any taxes on reimbursement and the employees do not have to pay any income taxes on these payments. So they are more convenient for everybody and especially for small businesses on a tight budget.
- QSEHRA does not require you to have a certain number of employees to offer health benefits to your employees. It also does not require employees to pool in money as required in group health plans.
This result in more flexibility for the employer and small businesses can easily cover the health expenses of their employees. They can offer varying degrees of reimbursements to each employee depending on their seniority, importance to the business or health conditions.
- SQSEHRA is more efficient because it does not see an increase in the amount of premium that needs to be paid. The specified amount remains the same until the employer wants to increase it, helping small businesses manage their budget easily.
To further understand this health care option you can read this QSEHRA guide for small employers. The guide covers all the aspects of getting an HRA for your small business health expenses.
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