Small employers who don’t offer group health coverage to their employees can help employees pay for medical expenses through a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). If your employer offers you a QSEHRA, you can use it to help pay your household’s costs (like your monthly premium) for qualifying health coverage.
How will I know if my employer offers me a QSEHRA?
You'll get a letter from your employer with your QSEHRA amount.
If I'm offered a QSEHRA, am I still eligible for the tax credit through the Marketplace?
The amount of QSEHRA you get will change the tax credit amount you’re eligible for. You may either be eligible for some or no tax credit.
When you apply for coverage, the Marketplace won’t have information about your QSEHRA, so you may not want to use all of the tax credit that's shown in your Marketplace eligibility notice.
Your QSEHRA amount will affect your final eligibility for the premium tax credit, which is determined when you file a federal income tax return for the year. When you file your taxes, the Internal Revenue Service will determine your final eligibility for the tax credit based on how much QSEHRA your employer offered you (your eligibility for the tax credit is affected even if you didn’t use the QSEHRA). Your tax credit amount could also be affected by any changes in your income or other life changes during the year. If you use more of the premium tax credit than you qualify for, you’ll have to pay the difference back when you file your federal taxes. Learn more about reporting life changes.
How do I use my QSEHRA and tax credit?
You should use your QSEHRA to help pay for your health coverage during the year. If the Marketplace found you or your family eligible for savings, you should use less of the tax credit when you’re asked by the Marketplace how much you want to use.
Try to limit the amount of tax credit you use, unless you can’t afford coverage without using some or all of it. If you don't limit your tax credit now, you’ll have to pay the difference back when you file your federal taxes—that's when your final income for the year, as well as the amount of QSEHRA your employer offered, will be compared to the amount of tax credit you used during the year.
To avoid the risk of paying back any of the credit at tax time, it's best not to use any of your tax credit now. If you do use it, lower the amount of tax credit you use by at least the amount of your QSEHRA. The Marketplace asks how much tax credit you want to use each month. So, if your employer's letter tells you a monthly amount, you can subtract that amount from the tax credit the Marketplace offers you. If your employer's letter gives a QSEHRA amount for the year, remember to divide the QSEHRA amount by the number of months you’ll be covered (most people will use 12 months).
If you use less tax credit than you're eligible for, you can still claim the tax credit amount you didn’t use when you file your federal taxes.
I got a QSEHRA letter from my employer after I enrolled in Marketplace coverage for the year. What should I do?
To reduce your chances of having to pay back the tax credit you used when you file your federal taxes, lower the tax credit amount you use for the rest of your plan year. Your employer must report the QSEHRA amount they offered you to the Internal Revenue Service. Your QSEHRA amount will affect the amount of tax credit you’re eligible for at the end of the year. You may have to pay back some or all of the tax credit you used when you file your federal taxes the next year.
What if I'm not eligible for the tax credit?
If you apply for Marketplace coverage and you’re not eligible for the premium tax credit, you can still use your QSEHRA to help pay for a Marketplace plan. Depending on your final household income for the year, the Internal Revenue Service may determine you’re eligible for the premium tax credit when you file your federal taxes.