Employers should consider the full financial impact a QSEHRA could have on their employees’ premium costs. While QSEHRAs can help reduce employees’ health care costs, QSEHRAs can increase health care costs for some employees who purchase individual health plan coverage through the Health Connector and receive premium tax credits or ConnectorCare state premium subsidies.
Under federal tax law, employees cannot get both a QSEHRA benefit from their employer and a full premium tax credit through the Health Connector. If an employee qualifies for a premium tax credit through the Health Connector, and their employer offers a QSEHRA benefit (even if the employee does not use it), the employee’s premium tax credit amount will be reduced or eliminated by the federal government when they file taxes and the employee will have to pay the federal government back either some or all of their premium tax credit amount. For more information about how QSEHRAs work and what employees should know about QSEHRAs, please visit https://www.mahealthconnector.org/help-center-answers/hra-and-your-aptc
The following example demonstrates how an employee’s costs may increase if they are eligible for premium tax credits and their employer provides a QSEHRA:[1]
Consider an employee in Boston earning 200% of the federal poverty level (FPL) or $24,280 annually. Under current law, she would be eligible for an APTC of $140 and a ConnectorCare state premium subsidy of $49. Her employer cannot afford group coverage but decides to make a QSEHRA contribution of $100 per month. The QSEHRA offered to the employee is considered affordable coverage based on the federal formula, therefore, the employee is no longer eligible for premium tax credits. Since the subsidies (premium tax credit and ConnectorCare state premium subsidy) this employee is no longer eligible to receive were a larger amount than the QSEHRA benefit her employer provides, the employee’s costs increase as a result of the QSEHRA. Without the QSEHRA, this employee’s plan would have cost $85. With the QSEHRA (and without federal and state premium subsidies) this employee will now pay $174 for the same plan.
| (All Monthly) | Income | 2nd-Lowest Cost Silver Plan Premium | Premium Tax Credit | ConnectorCare Subsidy | Employer QSEHRA Contribution | Employee Pays |
|---|---|---|---|---|---|---|
| Employer does not offer QSEHRA | $2,023 | $272 (self-only) | $140 | $49 | None | $85 |
| Employer offers QSEHRA | $2,023 | $272 (self-only) | None | None | $100 (self-only) | $174 |
The information provided here is general in nature and based on authorities that are subject to change. This information does not, and is not intended to, provide legal, tax, or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations.
[1] Example uses 2019 premium and APTC data from the Kaiser Family Foundation premium and APTC calculator; all 2019 income data from Mass Legal Services ; CCA 2019 non-group QHP calculator.