What is a QSEHRA? Everything an Employee Needs to Know

If your employer recently announced that they’re offering a QSEHRA, you might be wondering what exactly that means and how it affects you. Don’t worry, we’ve got you covered. This guide explains everything you need to know about QSEHRAs in simple terms, so you can make the most of this valuable benefit.

What Is a QSEHRA?

QSEHRA stands for Qualified Small Employer Health Reimbursement Arrangement. It’s a health benefit that allows your employer to reimburse you tax-free for eligible medical expenses, including health insurance premiums.

Think of it like this: Instead of your employer offering a traditional group health plan, they give you a monthly allowance to help cover your health insurance and out-of-pocket medical costs. You choose the plan that works best for you, pay for it, and then get reimbursed.

Who Can Get a QSEHRA?

QSEHRAs are offered by small businesses and nonprofits with fewer than 50 full-time employees. If your employer has set one up, it’s available to you as long as you meet the eligibility requirements, which usually include:

• Being a full-time employee (sometimes part-timers are included, depending on the plan design)

• Having minimum essential coverage (a health plan that meets the basic requirements of the Affordable Care Act)

What Can Be Reimbursed?

QSEHRAs can reimburse you for a wide range of qualified medical expenses, including:

• Health insurance premiums (individual, family, or marketplace plans)                                                                                                  SHOP FOR PLANS HERE:  https://www.healthsherpa.com/?_agent_id=gabriel-pelphrey 

• Dental and vision insurance premiums

• Doctor visits and co-pays

• Prescription medications

• Medical equipment

• Mental health counseling

• And more (based on IRS Publication 502)

⚠️ Important: Your specific plan may have rules on what’s eligible, so be sure to check your employer’s QSEHRA policy document.

How Does It Work?

Here’s a simple step-by-step of how a QSEHRA works:

1. We walk you through purchasing coverage: You purchase your own health insurance plan or continue a current one.

2. You pay for care: You also pay for out-of-pocket healthcare costs as needed.

3. You submit receipts: You submit proof of expenses (such as insurance premiums or medical receipts).  You can access your QSEHRA Account Here:  https://stratlegacy.lh1ondemand.com/Main.aspx  (or download our app on Apple devices, Strategic Legacy Partners HRA)  

4. You get reimbursed: Your employer reimburses you, up to the monthly limit they’ve set.

Are Reimbursements Taxable?

Nope! If you have minimum essential coverage, QSEHRA reimbursements are tax-free to you. That means no income or payroll taxes are taken out of the amount your employer reimburses you.

If you don’t have minimum essential coverage, your reimbursements will be taxable, and you might have to pay back any overpaid tax-free amounts.

Do I Have to Report Anything?

In most cases, you don’t need to do anything special when you file your taxes. However, you should:

• Keep all your receipts and proof of insurance in case you need to verify expenses.  They will need to be uploaded to your QSEHRA account here:  https://stratlegacy.lh1ondemand.com/Main.aspx 

• Let your tax preparer know that you’re receiving QSEHRA reimbursements

• Watch for any reporting from your employer on your W-2

Can I Still Use Premium Tax Credits?

If you buy your insurance through the Marketplace and receive premium tax credits, your QSEHRA reimbursement may affect those. Here’s how it works:

• If your QSEHRA is considered “affordable,” you can’t also receive premium tax credits.

• If it’s not affordable, you can choose between keeping your premium credits or accepting the QSEHRA — but not both.  

• Find the QSEHRA Worksheet here to calculate affordability:  https://www.healthcare.gov/downloads/qsehra-worksheet.pdf 

Your employer should provide documentation that tells you whether the QSEHRA is affordable based on your household income.

What If I Leave My Job?

QSEHRAs are employer-funded and don’t roll over or stay with you if you leave your job. Typically:

• You can submit claims for expenses that occurred while you were employed

• You’ll have a short window (often 60–90 days) to submit final claims

• Any unused allowance stays with the employer

Final Thoughts

QSEHRAs are a flexible and tax-efficient way for small employers to help you pay for health insurance and medical expenses — while giving you the freedom to choose the plan that works best for you and your family.

If your employer offers a QSEHRA, take the time to:

✅ Understand the allowance amount
✅ Review what’s reimbursable
✅ Keep good records
✅ Ask questions when you’re unsure