Who may offer one, and the two tests are conjunctive. Section 9831(d)(3)(B) defines an eligible employer as one that "is not an applicable large employer as defined in section 4980H(c)(2)" and "does not offer a group health plan to any of its employees." The first test is the Affordable Care Act's 50-full-time-equivalent threshold, measured as an average across the preceding calendar year. The second is absolute: an employer that keeps a group plan for even one class of workers cannot also run a QSEHRA. An employer that fails either test and still wants to fund individual coverage is looking at an individual coverage HRA instead, which has no size limit and no dollar cap but a longer list of conditions.
Who counts as an eligible employee. Section 9831(d)(3)(A) starts from every employee and then lets the arrangement exclude the categories that section 105(h)(3)(B) already lets a self-insured plan exclude: employees who have not completed the required period of service, which for a QSEHRA is 90 days rather than the usual three years, employees under 25, part-time or seasonal employees, employees covered by a collective bargaining agreement where health benefits were the subject of good faith bargaining, and nonresident aliens with no United States source earned income. Everyone else in the business has to be offered it.
Same terms, with one permitted variation and a strict way of measuring it. The arrangement must be "provided on the same terms to all eligible employees." Subsection (d)(2)(C) then allows the permitted benefit to vary "in accordance with the variation in the price of an insurance policy in the relevant individual health insurance market" based on the employee's age, the age of covered family members, or the number of family members covered. That variation "shall be determined by reference to the same insurance policy with respect to all eligible employees," so an employer cannot pick a different reference policy for each worker.
The cap, and the two ways it moves. The arrangement must provide that the total payments and reimbursements for any year cannot exceed the statutory maximum, which Congress set at $4,950 for self-only coverage and $10,000 for family coverage and indexed from a 2015 base. For 2026 that produces $6,450 for self-only coverage and $13,100 where the arrangement also reimburses family members. Two mechanical points sit underneath. The indexed figures are rounded down to the next lowest multiple of $50, so the limit moves in $50 steps. And an employee not covered for the whole year gets a prorated limit under (d)(2)(D)(i), calculated as the annual maximum multiplied by the number of months of coverage over twelve.
Proof of coverage comes first, and the notice comes before the year. Subsection (d)(2)(B)(ii) requires that the arrangement pay or reimburse "after the employee provides proof of coverage," which is a condition rather than an administrative preference. Separately, (d)(4) requires the employer to give each eligible employee a written notice not later than 90 days before the year begins, or when they first become eligible, stating the amount of their permitted benefit, telling them to give that figure to any Exchange from which they seek advance payments of the premium tax credit, and warning that if they are not covered by minimum essential coverage for a month, they may owe tax and the reimbursements may be includible in income.
How it interacts with the premium tax credit, which is the part most employees care about. Section 36B(c)(4) does two things. If the QSEHRA constitutes affordable coverage for a month, that month is not a coverage month and no credit is allowed at all. If it does not, the credit is still reduced by one twelfth of the employee's permitted benefit, which the statute labels a "denial of double benefit." Affordability has its own test: take the premium the employee would pay for self-only coverage under the second lowest cost silver plan in the relevant individual market, subtract one twelfth of their permitted benefit, and compare the result with one twelfth of an indexed percentage of household income that the statute sets at 9.5 percent before indexing. Note this benchmark is the second-lowest-cost silver plan, the same one the credit itself uses, and differs from the lowest-cost plan used to test an individual coverage HRA.
Two consequences of not being a group health plan. COBRA continuation coverage attaches to group health plans, so a QSEHRA does not carry a COBRA right of its own. And the market reforms that force an ordinary HRA to be integrated with other coverage do not reach it, which is precisely why an employer with no group plan can run one at all. Gaining a QSEHRA is a triggering event for a Marketplace special enrollment period, so an employee newly offered one does not have to wait for open enrollment to buy the coverage the arrangement requires.
