Health Plans for the Self-Employed Owner: ICHRA vs QSEHRA

Many small-business owners find themselves in a quandary between supporting their employees’ well-being and balancing their operating budget. The self-employed often have businesses that are large enough to offer a health plan but too small to afford a typical group plan, making this balancing act even more difficult.

There are two medical reimbursement benefits on the market that are worth consideration for self-employed business owners. They are the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) and the Individual Coverage Health Reimbursement Arrangement (ICHRA).

They are both owned and funded by the employer and both provide tax-free funds (no payroll or income tax) to reimburse certain qualified medical expenses. Here’s a comparison of what and who they cover.


This arrangement is available to companies of any size—but the business may NOT offer a group health plan to eligible classes of employees.

Any employee, whether full- or part-time, salaried or hourly, or seasonal is eligible. Employees must be enrolled in individual health coverage, as do spouses and dependents to have expenses reimbursed.

Through the ICHRA, the employer can reimburse individual health premiums as well as Medicare, and/or non-insured 213(d) medical expenses. The IRS defines these medical expenses as:

“…the costs of diagnosis, cure, mitigation, treatment, or prevention of disease… affecting any part or function of the body. These expenses include payments for legal medical services rendered by physicians, surgeons, dentists, and other medical practitioners. They include the costs of equipment, supplies, and diagnostic devices needed for these purposes. They also include the costs of medicines and drugs that are prescribed by a physician.” Read more here.

The ICHRA is considered a group health plan, so it is compatible with Section 125 Plan flexible spending accounts (FSA) and dependent care assistance plans (DCAP). It is also designed to be compatible with health savings accounts (for individuals enrolled in high-deductible health plans).

There are no IRS-specified contribution limits; the amount is determined by the employer.


The Qualified Small Employer HRA was established after the 21st Century Cures Act was enacted in 2017, which opened the door for employers with fewer than 50 employees to offer the QSEHRA. The business is prohibited from sponsoring a group plan to any of its workers.

To participate, employees must be enrolled in a “Minimum Essential Coverage” (MEC) health plan, as do their spouses and dependents. This is health insurance coverage that satisfies the Affordable Care Act’s individual mandate provision

Unlike the ICHRA, Medicare premiums are excluded from reimbursements; other health insurance premiums and 213(d) medical expenses are allowed.

The IRS sets contribution limits for this arrangement. For 2024, the maximum amount an employer can choose to reimburse through a QSEHRA is $6,150 for a single employee’s coverage and $12,450 for family coverage. The employer decides the maximum benefit amount within this scope.

NOTE: If the QSEHRA is designed to only reimburse individual health plans (and no other medical expenses), it is compatible with health savings accounts.

Need Help Deciding Which Plan Is Right for Your Business?

The team at CHR can walk you through these benefit options and help you evaluate which may be a good fit for your small business. Contact us for a consultation.