The short version: QSEHRA is simpler and works for most small employers (under 50 employees, no group plan). ICHRA offers more flexibility — tiered allowances, class-based eligibility, no size cap — but adds administrative overhead. If you're under 10 employees and have no group plan, start with QSEHRA. If you have 10+ employees or want more nuanced benefit tiers, ICHRA is worth the complexity.
2026 Side-by-Side Comparison
| Feature | QSEHRA | ICHRA |
|---|---|---|
| 2026 Contribution Limit (self-only) | $6,350/yr ~$529/mo (IRS Rev Proc 2025-32) |
No statutory cap Must meet ACA affordability threshold |
| 2026 Contribution Limit (family) | $12,700/yr ~$1,058/mo (IRS Rev Proc 2025-32) |
No statutory cap No family cap; affordability rules apply |
| Eligibility | Any employer with <50 FTEs that does not offer a group health plan | Any employer — no size limit. Can offer alongside a group plan (to different employee classes) |
| Class-Based Tiers | ✗ Not allowed One allowance for all eligible employees |
✓ Allowed Full-time, part-time, seasonal, hourly, salaried, by state, by age band |
| ACA Employer Mandate | ✓ Satisfies mandate Treated as an employer-sponsored plan |
✓ Satisfies mandate When integrated with MEC and meets affordability |
| MEC Required? | ✓ Yes Employee must have individual coverage for tax-free reimbursements |
✓ Yes (integrated) Must require MEC for full ACA compliance and tax treatment |
| Employee ACA Subsidy Impact | Lose subsidies while receiving reimbursements Same for both plans |
Lose subsidies while receiving reimbursements Same for both plans |
| Administrative Complexity | Low No class subdivisions, no affordability testing, no Marketplace integration |
Higher Class definitions, uniform offer requirements, affordability verification |
| Start-Up Cost | $49/mo (ClaimSage) Plan document + one-time setup |
$49/mo+ (ClaimSage) Plan document + compliance review + employee class setup |
| Best For | ≤10 employees, no group plan, want simplicity | 10–50 employees, want tiered benefits, or already have a group plan for some staff |
ICHRA Employer ROI Calculator
See how much you could save by switching from a traditional group plan to an ICHRA. Enter your current numbers to get a personalized estimate.
Why ICHRA Usually Costs Less Than Group Coverage
Individual health plans are priced for the individual market — and for many small employer groups, they're significantly cheaper than group rates. Here's why:
| Cost Driver | Traditional Group Plan | ICHRA (Individual Plans) |
|---|---|---|
| Risk Pool | Entire company — one bad claims year hits everyone | Employees each have their own plan — no cross-subsidization |
| Plan Selection | One-size-fits-all; employer often subsidizes high-cost employees | Employees choose their own plan — you reimburse, they pick |
| Administration | Annual renewal, census updates, plan changes, SBC documents | Monthly reimbursement — simpler structure, fewer moving parts |
| Rate Increases | Entire pool re-rated; one bad year can double premiums | Individual plans don't spike for one employer's claims |
| Broker/TC Commission | Typically 5–8% of premium — baked into group cost | Often lower or flat-fee — more transparent pricing |
| Typical Savings | Baseline | 20–40% for most small employers |
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When QSEHRA Wins
Simplicity is your priority
- You have 2–10 employees and no group plan
- You want one flat allowance for everyone
- You don't want to define employee classes
- Your team is in one state with similar ages
- You want to set it up in under a month
- You don't want to monitor ACA affordability thresholds
You need more flexibility
- You have 10+ employees with varying tenures
- You want to reward longer-tenured employees with higher allowances
- You have some employees in states with very different plan costs
- You're approaching 50 FTEs and want to phase in ICHRA
- You want to offer the HRA alongside a group plan for some employees
- You have a diverse mix of full-time and part-time staff
3-Question Decision Quiz
Answer three quick questions to get a personalized recommendation.
Estimate Your Annual Cost
Employer Cost Calculator
Use this to compare your expected cost under each plan. For QSEHRA, your maximum allowance is capped by IRS limits. For ICHRA, you set the amount — use the slider to model different scenarios.
Estimates are illustrative. Actual costs depend on individual employee plan choices, state, and ages. Consult your CPA.
Frequently Asked Questions
Can an employer offer both QSEHRA and ICHRA?
No. A small employer must choose one or the other — they cannot offer both simultaneously. QSEHRA and ICHRA are mutually exclusive under IRS rules. However, an employer can offer an ICHRA to some classes of employees and a different benefit to others (e.g., ICHRA for full-time employees, no group plan for part-time), but not both HRA types to the same employee.
What are the 2026 IRS contribution limits for QSEHRA and ICHRA?
For QSEHRA, the 2026 limit (per IRS Revenue Procedure 2025-32) is $6,350/year for self-only coverage and $12,700/year for family coverage. For ICHRA, there is no statutory cap by default, but the 2026 indexed ACA affordability threshold requires employers to contribute at least 50% of the lowest-cost self-only Silver plan available in the employee's rating area. Very small ICHRA contributions may fail the affordability test, exposing the employer to ACA employer mandate penalties.
How do QSEHRA and ICHRA affect employee ACA subsidies?
Both plans cause employees to lose their ACA Marketplace premium tax credits for any month they receive the HRA reimbursement. The impact is similar for both plans. However, ICHRA with integrated coverage may allow employees to access Marketplace subsidies if the ICHRA is deemed unaffordable or if they are in a certified "excepted benefit" category — something that does not apply to QSEHRA. Employers should model the subsidy impact for lower-wage employees before implementing either plan.
What does "integrated" mean for ICHRA, and why does it matter?
An ICHRA is "integrated" when employees are required to maintain Minimum Essential Coverage (MEC) — typically an individual health plan — in order to participate. This allows the ICHRA to be treated as an ACA-compliant group health plan rather than a health benefit arrangement, which affects employer reporting and how employees are taxed on reimbursements. A non-integrated ICHRA loses most tax advantages and is treated differently under the ACA.
Is ICHRA harder to administer than QSEHRA?
Generally, yes — ICHRA involves more administrative complexity. Employers must classify employees into eligibility classes (full-time vs. part-time, seasonal, employees in different states), offer the benefit uniformly within each class, and handle reimbursements across individual plans with varying premiums. QSEHRA is simpler: one allowance amount, one class of eligible employees (anyone not covered by a group plan), and no class-subdivision requirements. For very small employers (under 10 employees), QSEHRA's simplicity is usually the deciding factor.
Which plan is better for a 2–5 person company?
QSEHRA is almost always the better choice for companies with fewer than 5 employees. The 2026 IRS self-only limit of $6,350/year translates to ~$529/month per employee — more than enough for many individual health plans in most states. The simplicity advantage is significant at this size: no class-subdivision, no affordability testing, no Marketplace integration required. ICHRA becomes more attractive when the company is approaching 50 employees, has a diverse workforce, or wants to offer tiered benefits.
Can a new employer set up QSEHRA or ICHRA mid-year?
Yes for both, but with different rules. For QSEHRA, a new employer can establish the plan at any time and must notify eligible employees within 90 days of plan adoption. The first-year contribution limit is prorated based on the number of months remaining in the calendar year. For ICHRA, mid-year adoption is also permitted, but class-of-employee restrictions and the MEC requirement must be satisfied. An employer switching from a group plan to ICHRA mid-year faces special rules around coverage start dates.
Where can I learn more about eligibility rules?
ClaimSage's free eligibility screener asks 5 questions and tells you which programs your business qualifies for — including QSEHRA and ICHRA. You can also read IRS guidance at irs.gov or consult a licensed benefits broker. ClaimSage is not a licensed broker or legal advisor — use the screener as a starting point and verify with a qualified professional before making a decision.
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