ICHRA and QSEHRA both let an employer reimburse employees tax-free for individual health coverage instead of sponsoring a group plan — QSEHRA came first (2017), ICHRA came later (2020) and is the broader, more flexible version. If you're a small employer trying to figure out which applies to you, the eligibility rules are where they actually diverge.
Side by side
| ICHRA | QSEHRA | |
|---|---|---|
| Employer size | Any size | Fewer than 50 full-time employees |
| Can offer alongside a group plan? | Yes, to a different employee class | No — employer must offer no group plan at all |
| Contribution cap | No federal cap | IRS sets an annual cap, adjusted yearly |
| Vary by employee class? | Yes, by defined job-based classes | Only by family size and age (within limits), same for everyone otherwise |
The practical decision
If you have 50 or more full-time employees, QSEHRA isn't available to you at all — ICHRA is the only option between these two. If you're under that threshold, the real question is whether a flat, capped contribution (QSEHRA) is enough, or whether you want the flexibility to set different allowances for different employee classes and go beyond the IRS cap (ICHRA). QSEHRA's simplicity — one flat structure, no class rules to design — is genuinely easier to administer for a very small business; ICHRA's flexibility matters more once you have meaningfully different groups of employees (full-time vs. part-time, multiple office locations) that you'd want to treat differently.
Both interact with ACA marketplace subsidies the same way: an employee generally can't combine either arrangement with a premium tax credit on the same coverage, and whether the employer's offer counts as “affordable” depends on comparing it against a benchmark plan relative to household income — see how ACA subsidies actually work for that mechanism.
This is general information, not tax or legal advice: Both arrangements have specific IRS notice, documentation, and affordability-testing requirements. Work through the setup with a licensed benefits advisor or tax professional before choosing between them.