QSEHRA calculator and 2026 limits

Check your QSEHRA allowance

The IRS publishes the next year's QSEHRA limits each fall with its other inflation adjustments. The 2027 limits weren't out when I published this page, so the calculator uses 2026. I'll update it when the new figures are released.

What a QSEHRA is

A QSEHRA is a simple way for a small company to help with health costs without sponsoring a group plan. The company sets a monthly allowance. Employees buy their own individual health insurance (or are covered elsewhere) and submit premiums and medical expenses for reimbursement, tax-free up to the allowance.

Worked examples

What a QSEHRA can reimburse

The plan document decides what's covered, within what the tax code allows. Most small employers choose one of two designs:

• Premiums only. The QSEHRA reimburses individual health insurance premiums. Simple to run and easy for employees to understand.
• Premiums and medical expenses. The QSEHRA also reimburses deductibles, copays, prescriptions and other eligible expenses under Section 213(d). More flexible, more receipts.

Employees can use a QSEHRA even if they're covered by a spouse's group plan, as long as they have minimum essential coverage. That's a meaningful difference from ICHRA, which requires the employee to be enrolled in individual coverage or Medicare.

A QSEHRA can't be combined with a group plan, and it doesn't satisfy the employer mandate. That's fine while you're under 50 full-time equivalents, but if you're growing quickly, plan the switch to ICHRA or a group plan before you cross the line. The ALE calculator shows where you stand.

How a QSEHRA interacts with premium tax credits

This is the part most small employers miss. An employee who buys an exchange plan and qualifies for a premium tax credit has their credit reduced by the QSEHRA allowance. If the QSEHRA is "affordable" for them, they can't get a credit at all.

A QSEHRA is affordable if the second-lowest-cost silver plan's self-only premium, minus one-twelfth of the annual self-only allowance, is no more than 9.96% of household income in 2026. Employees have to report the allowance when they apply for a credit, so tell them the amount in writing.

Is the QSEHRA limit enough?

The 2026 self-only cap of $537.50 a month covers a lowest-cost silver plan for most people in their 20s and 30s, but often not for people in their 50s and 60s, whose individual premiums can run $1,000 to $1,500 a month in many states. The family cap of $1,091.66 a month rarely covers a family's full premium.

That's fine if your goal is to help with costs rather than cover them. But if you want the allowance to fully fund a good plan for everyone, including older employees and families, a QSEHRA won't get you there. That's the most common reason the small employers I talk to move to ICHRA, which has no cap and lets you set larger allowances for older employees within the 3:1 rule.

If you're comparing the two, run your oldest employee through the ICHRA affordability calculator to see what a compliant ICHRA allowance would be.

QSEHRA or ICHRA?

I recommend ICHRA over QSEHRA once you want to give more than the QSEHRA limit, which happens quickly with older employees or families, or once you need different allowances for different groups. ICHRA also scales past 50 employees, so you won't need to switch later. Check the minimum allowance with our ICHRA affordability calculator.

Setting up a QSEHRA step by step

1. Confirm you qualify Count full-time employees and equivalents. Under 50, and no group health plan for anyone, including a group dental or vision plan that isn't an excepted benefit.
2. Choose the allowance Pick monthly self-only and family amounts at or below the limits. Many companies start around $300 to $500 for self-only coverage.
3. Decide who's eligible All full-time employees must be offered it. You may exclude employees in their first 90 days, under 25, part-time or seasonal, and those covered by a collective bargaining agreement.
4. Adopt a plan document A written plan sets the allowance, eligible expenses and how claims are reimbursed.
5. Send the written notice At least 90 days before the plan year starts (or by the date a new employee becomes eligible). It must state the allowance and tell employees to report it if they apply for premium tax credits.
6. Verify coverage and reimburse Collect proof of minimum essential coverage, then reimburse premiums and eligible expenses up to the allowance.
7. Report it on the W-2 Show the amount available in Box 12 with code FF.

Penalties for getting it wrong are real. Reimbursing individual premiums outside a properly designed QSEHRA or ICHRA can be treated as an "employer payment plan," which can trigger an excise tax of $100 per day per affected employee. That is the main reason not to simply add a health stipend to payroll; see our guide to health insurance stipends.

QSEHRA allowances are use-it-or-lose-it by default. Unused amounts can carry over within the limit if the plan allows it, but the total available in a year still can't exceed the cap.

Running an HRA with Prescience

Prescience Choice is an ICHRA, so it has no annual cap and lets you set allowances by class. For most small teams the price is similar to a QSEHRA administrator, and you avoid outgrowing it.