Employers should explain QSEHRA as a tax-free monthly health benefit that gives employees money to buy their own health insurance and get reimbursed for eligible premiums and medical expenses.
What QSEHRA is (employee-facing explanation)
QSEHRA is an employer-funded health benefit, not a group insurance plan
A QSEHRA is:
A monthly allowance provided by the employer
Used by employees to buy their own health insurance
Reimbursed tax-free when eligibility rules are met
Not a group health insurance plan
Employees choose their own coverage instead of being placed on one company plan.
How to explain QSEHRA to employees
Step 1: Explain the core concept simply
Employees should understand:
The employer provides a monthly dollar amount
Employees buy their own individual health insurance
Employees submit proof of expenses
The employer reimburses them up to their allowance
Step 2: Explain what QSEHRA pays for
Employees can generally use QSEHRA for:
Individual health insurance premiums
Medicare premiums
Eligible medical expenses (depending on plan design)
They must have Minimum Essential Coverage (MEC) to receive tax-free reimbursements.
Step 3: Explain how employees get reimbursed
Pay for health insurance or eligible expenses
Submit proof of coverage and/or receipts
Receive reimbursement from the employer (via payroll or direct reimbursement process)
Repeat monthly or as claims are submitted
Required legal communication employers must include
Employers must provide a written notice that includes:
The employee’s maximum annual allowance
Instructions for how employees report QSEHRA when applying for Marketplace subsidies
Notice that employees must have Minimum Essential Coverage to receive tax-free reimbursements
Notice that reimbursements may be taxable if coverage requirements are not met
This notice must be provided in writing to all eligible employees.
What employees must understand clearly
1. Employees must have qualifying health coverage
To receive tax-free reimbursement, employees must have:
Marketplace individual health insurance
Employer-sponsored job-based coverage (in some cases)
Medicare
Medicaid or CHIP (where applicable as MEC)
Without MEC:
❌ Reimbursements may become taxable
❌ Eligibility may be affected
2. QSEHRA may affect Marketplace tax credits
If employees buy insurance through the Marketplace:
QSEHRA can reduce or eliminate premium tax credits
Employees must adjust subsidy amounts when applying
Failure to adjust may result in tax repayment at year-end.
3. QSEHRA is not a group health plan
Employees should understand:
The employer is not choosing their insurance
Coverage depends on individual selection
Employees are responsible for enrolling in a plan
Common employee questions employers should be ready to answer
Do I have to buy insurance?
Yes, employees must have qualifying coverage to receive tax-free reimbursements.
What if I already have insurance through a spouse?
Employees may still participate, but reimbursements may be limited depending on tax treatment rules.
What happens if I don’t use my allowance?
Unused amounts typically remain with the employer and are not paid out.
Who pays me back?
The employer reimburses the employee directly or through payroll—not Take Command Health.