Two HRAs. They are not interchangeable.
A QSEHRA and an ICHRA both reimburse individual coverage instead of buying a group plan. That is where the similarity ends. One is capped and closed to employers with a group plan. The other has no ceiling and can sit alongside one. Choosing the wrong one is not a preference problem, it is an eligibility problem.
The difference is your group plan.
Start here, because this single question rules one of them out before anything else matters.
QSEHRA
Only if you have fewer than 50 full-time equivalent employees and offer no group health plan at all. Not to some employees, not to one class. None.
Contributions are capped by the IRS. Every eligible employee has to be offered it on the same terms, with limited variation permitted for family size and age. Employees need minimum essential coverage for the reimbursement to be tax-free.
ICHRA
Any employer, any size, and you may keep a group plan — provided no single class of employees is offered both.
There is no federal contribution cap. You define employee classes from a permitted list and set a different allowance for each. Employees must be enrolled in individual coverage or Medicare, and you have to verify it.
If you have a group plan today and want to keep it for some people, QSEHRA is already off the table. If you are under 50 with no plan at all, both are open and the decision turns on cost and control.
What you are allowed to put in.
Indexed every year. These are the 2026 figures — check them again before you set a 2027 allowance.
QSEHRA Maximum
$6,450 self-only. $13,100 for family coverage. An annual ceiling set by the IRS, prorated for anyone eligible part-way through the year.
ICHRA Maximum
None. There is no federal cap on an ICHRA allowance. The constraint is your budget and, if you are subject to the employer mandate, affordability.
Excepted-Benefit HRA
$2,200. A smaller HRA that sits alongside a group plan for things like dental, vision and COBRA premiums. Often confused with the two above; it does not reimburse individual medical premiums.
Figures from the IRS inflation-adjustment procedures for 2026. For the surrounding numbers — health FSA at $3,400 with a $680 carryover, HSA at $4,400 and $8,750 — see the benefits compliance calendar.
Where employers get caught.
Every one of these is survivable if you see it coming, and expensive if you do not.
The 90-Day Notice
Both arrangements require written notice to eligible employees at least 90 days before the plan year starts. Miss it and you are into penalties and a delayed launch, not a warning letter.
The Premium Tax Credit Collision
An offer changes what an employee can claim on the exchange. A QSEHRA reduces their premium tax credit dollar for dollar. An ICHRA that is affordable disqualifies them from it entirely. For a lower-paid workforce this can leave people worse off, which is a conversation to have before you launch, not after.
Classes You Cannot Invent
ICHRA classes come from a defined list — full-time, part-time, seasonal, salaried, hourly, geography and a few others. You cannot build a class around who is expensive to cover, and minimum class sizes apply when you also run a group plan.
Proof of Coverage
An ICHRA reimbursement is only tax-free if the employee actually holds individual coverage, and you are responsible for substantiating it every year. This is the part employers underestimate, and it is why the administration platform matters more than the plan design.
The Mandate Does Not Disappear
At 50 or more full-time equivalents you still owe the employer mandate. An ICHRA can satisfy it, but only if the allowance clears the affordability test for the lowest-cost silver plan in each employee’s own rating area — which varies across Michigan.
Renewal Is Not Automatic
Individual plan options and rates reset each year, and an allowance that was generous in one year can strand employees the next. An HRA needs the same annual market review a group plan gets.
What employers ask before choosing.
The six that come up in almost every conversation.
Is an ICHRA cheaper than a group plan?
Sometimes, and not automatically. What an ICHRA does reliably is make your cost predictable, because you set the allowance rather than receiving a renewal. Whether it is cheaper depends on your census, where your employees live and what individual rates look like in each of their rating areas. It should be modelled against a live group quote, not assumed.
Can we offer a group plan to some employees and an ICHRA to others?
Yes, with an ICHRA, as long as the two groups are different permitted classes and the class sizes meet the minimums. You cannot do this with a QSEHRA at all, because a QSEHRA requires that you offer no group health plan to anyone.
What happens to our employees who are already on a spouse’s plan?
A QSEHRA reimbursement is tax-free only if the employee has minimum essential coverage, which a spouse’s plan provides. An ICHRA is different and stricter: the employee must be enrolled in individual coverage or Medicare, and coverage through a spouse’s group plan does not qualify them to participate.
Do we still have to file anything?
Yes. Both are group health plans under ERISA, which means plan documents and a summary plan description, and the Form 5500 threshold still applies once you have 100 or more participants. Moving to an HRA reduces the carrier relationship, not the compliance obligation.
We are a Michigan employer with staff in several states. Does that help or hurt?
It usually helps. A scattered workforce is the case where a single group network serves everyone badly, and an HRA lets each employee buy coverage that works where they actually live. The complication is that affordability and plan availability differ by rating area, so the allowance needs to be tested in each one.
How long does it take to set one up?
Plan on the 90-day notice as your hard floor, and realistically a full quarter. The work that takes the time is not the plan design, it is the class definitions, the substantiation process and getting employees comfortable buying their own coverage.
General information about how these arrangements work, not legal or tax advice. We bring in ERISA counsel and your CPA where a plan-specific answer is needed.
The rest of the detail.
If you already know which arrangement you are looking at, start here.
ICHRA Strategy Support
How we run the class design, the notice timetable and the employee transition to individual coverage. ICHRA strategy support
HRA and FSA Administration
Who administers the reimbursements, how substantiation works in practice and what the platform has to do. FSA and HRA administration
Want the group-plan side of the comparison first? Our employee benefits cost calculator gives you a benchmark figure to weigh an HRA allowance against.
CFH is not a third-party administrator. We place and manage the arrangement and the vendors behind it; we do not administer the plan ourselves.
Setting an ICHRA up properly → · If you are under fifty employees →
Send us your renewal.
We’ll tell you whether it looks competitive, where we see opportunity, and the five questions we’d put to your carrier. No cost, and no obligation to move anything.
The renewal letter
Your current plan summary
Contribution split by tier
Enrolled counts by tier
Four documents — two more if your group is 50 or more. Nothing else; every extra one is a reason to postpone.
An independent employee benefits consulting firm. We look at the entire benefits program — cost, plan performance, risk and administration.
Bloomfield Hills, MI 48304
248.370.8853
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281.404.5670
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