QSEHRA: a health allowance for very small teams
A Qualified Small Employer HRA lets a business under 50 employees reimburse health costs tax free, with no group plan and no participation rules.
Best fit: Businesses under 50 employees with no group plan
Who can offer one
You can offer a QSEHRA if your business has fewer than 50 full-time employees, counting full-time equivalents, and offers no group health plan to anyone. It suits teams too small or too spread out for a group plan to make sense.
2026 limits
The IRS caps QSEHRA reimbursements each year. For 2026, the limits are:
- Self-only: $6,450 a year, about $537 a month
- Family: $13,100 a year, about $1,091 a month
You can set a lower allowance. The IRS usually posts the next year's limits in the fall.
Source: PeopleKeep, 2026 QSEHRA contribution limits, based on IRS guidance.
How it works
- Set an allowance and decide whether it covers premiums only or other medical costs too.
- Give eligible employees written notice at least 90 days before the plan year, or when they become eligible.
- Employees buy their own coverage and submit proof of premiums or expenses.
- You reimburse them, tax free, up to the allowance, and report the amount on their W-2.
Who you can leave out
A QSEHRA must cover every full-time employee, but you may exclude employees who:
- Have worked for you fewer than 90 days
- Are under 25
- Work part time or seasonally
- Are covered by a union contract that bargained over health benefits
QSEHRA or ICHRA
Both reimburse individual coverage. A QSEHRA is simpler and has a yearly cap. An ICHRA has no cap, works at any company size and lets you treat classes of employees differently. Teams that might grow past 50, or that want different allowances for full-time and part-time staff, often start with an ICHRA instead.
When a QSEHRA beats a group plan
A QSEHRA works best for very small teams that cannot meet a carrier's participation rules or do not want to manage a group plan at all. Employees keep plans they already like, and you avoid the yearly scramble of a group renewal. It is less helpful when employees want one shared network, or when the yearly cap is too low to cover what individual plans cost where your team lives.
Individual plan prices vary a lot by state and county. In places with strong individual markets, a QSEHRA can stretch further than in places with only one or two carriers. Our Kansas and Missouri pages describe two very different markets. If a QSEHRA falls short, a small group plan may cost less than you expect, and our small business health insurance guide explains how those plans are priced.
Getting set up
A QSEHRA needs a plan document, employee notices and a way to verify coverage and process reimbursements. Most employers use an HRA platform for that. We can help you size the allowance, compare it with a small group quote and point your team to individual plans in your area.
Compare your options
Tell us about your group. A licensed agent compares the carriers in your area and follows up with options.
Common questions
Something else? Ask a licensed agent.
Can I offer a QSEHRA and a group health plan?
No. A QSEHRA is only for employers that offer no group health plan to any employee. If you want to offer both a reimbursement plan and a group plan to different groups of workers, look at an ICHRA instead.
Do employees have to have health insurance?
Yes. To get tax-free reimbursements, an employee must have qualifying health coverage, such as an individual plan or a spouse's employer plan. You collect proof of coverage before paying out.
Can I give some employees more than others?
Only in narrow ways. Every eligible employee gets the same terms, though amounts can rise with age or family size when tied to the cost of an individual plan.
How does a QSEHRA affect premium tax credits?
An employee who buys a marketplace plan must report the QSEHRA. Depending on the amount, it can reduce or remove the employee's premium tax credit, so set allowances with that in mind.
What happens to money employees do not use?
It stays with your business. You only reimburse what employees spend on eligible costs, up to the allowance.
Other ways to cover your team
Compare all plan types- Small group health insurance Best fit: Most teams of 1 to 50 that want a traditional plan A fully insured plan from one carrier. You pay a fixed monthly premium, and ACA rules mean health history never changes your price.
- Level-funded health plans Best fit: Healthier teams open to a short health questionnaire A steady monthly cost that covers claims, admin and stop-loss protection. Low claims can mean a lower rate, and some plans refund part of the surplus.
- ICHRA Best fit: Teams spread across states, or owners who want a set budget You set a monthly allowance. Employees pick their own individual plans, and you reimburse them tax free. Works for any company size.
- Group dental and vision Best fit: Any employer adding benefits beside a health plan Low-cost add-ons employees use every year. Offer them with your health plan or on their own, paid by you, your team or both.
- Group life and disability Best fit: Employers rounding out a benefits package Employer-paid life insurance plus short-term and long-term disability coverage that protects your team's income. Group rates often beat individual policies.
Get your quote before renewal
Tell us about your team. A licensed agent compares plans from the carriers in your area and sends you options.
- Free, with no obligation to buy
- Small group, level-funded and ICHRA compared
- A licensed agent handles your request