Qualified Small Employer Health Reimbursement Arrangements

What to look for and how to protect yourself Under the right circumstances, sole proprietors and other small businesses can reimburse employees for legitimate out-of-pocket medical expenses up to the annual limits.

By implementing a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), employers can report these reimbursed medical expenses as a business deduction. If all the formalities are met, the reimbursements are not subject to income tax or payroll taxes.

The annual limits for year 2019 are $5,150 for self-only coverage and $10,450 for family coverage.

A QSEHRA can reimburse qualified medical expenses for the employee or the employee’s family members. These expenses include:

• Insurance premiums for individual health plans

• Fees for doctors, dentists, hospitals, and lab testing

• Long-term care insurance premiums • Transportation to and from medical care facilities

• Prescribed medication

Your business is eligible to set up a QSEHRA if:

• Your business has at least one and fewer than 50 full-time employees

.• Your business does not offer group health insurance to any employees.

• You agree to offer the QSEHRA benefits on the same terms to all eligible employees.

• Before reimbursing health insurance premiums, you verify that the employee or the employee’s family member is covered by health insurance.