A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) allows a small employer that does not offer a group health plan to:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) lets a small employer that does not offer a group health plan reimburse employees tax-free for their individual health insurance premiums and other qualifying medical expenses. The reimbursements are excluded from the employee's gross income and are deductible by the employer, provided the arrangement is offered on identical terms to all eligible employees and the employer has no other group coverage. QSEHRAs give small businesses a simple, tax-advantaged way to help workers purchase individual coverage, which is exactly what option A describes.
Why the other options are wrong
- B) A QSEHRA is a reimbursement arrangement, not a self-insurance mechanism; the employee's actual health coverage comes from an individual insurance policy, and the employer never assumes claim risk. The employer never assumes claim risk, so no stop-loss layer exists in a QSEHRA structure.
- C) QSEHRAs reimburse individual market health insurance premiums; Medicare Part D is a prescription drug program for Medicare beneficiaries and is not the coverage a QSEHRA is designed to fund. Individual market policies are the product the QSEHRA reimburses, not Medicare Part D plans.
- D) Worker classification is governed by separate tax and employment law; a QSEHRA neither requires nor authorizes converting employees into independent contractors, which would itself raise serious compliance issues.
Memory hook
QSEHRA = the small shop's way to pay your individual premium, tax-free, without running a group plan.