ICHRA & QSEHRA in Kansas City
Give your team a tax-free monthly allowance and let each person choose their own health plan. We help Kansas City employers on both sides of the state line decide whether an HRA beats a group plan, design it, and get every employee enrolled.
An ICHRA (individual coverage HRA) lets an employer of any size give employees a tax-free allowance to buy their own individual health insurance, with different amounts for different classes of employees. A QSEHRA(qualified small employer HRA) is the simpler version for businesses under 50 employees that don't offer a group plan, capped for 2026 at $6,450 a year self-only and $13,100 family. Both replace a group plan with a fixed, predictable budget. The catch is that your employees now shop the individual market, so someone has to help them choose.
QSEHRA vs. ICHRA vs. a traditional group plan
Three ways to pay for your team's health coverage. Most of the decision comes down to the first three rows.
| QSEHRA | ICHRA | Group plan | |
|---|---|---|---|
| Who can offer it | Employers with fewer than 50 full-time and full-time-equivalent employees that offer no group health plan | Any employer, any size — including employers of 50 or more | Any employer that meets the carrier's participation rules |
| How much the employer gives | Up to $6,450 self-only or $13,100 family for 2026 | No federal cap — you set the allowance | You choose a share of a fixed premium |
| Different amounts for different groups | No — same terms for every eligible employee (varying only by age or family size) | Yes, by class: full-time, part-time, hourly, salaried, location and more | Contribution can vary by class within carrier rules |
| What employees buy | Their own individual plan; the allowance reimburses premiums and medical expenses | Their own individual plan, on or off the marketplace (or Medicare) | The plan, network and carrier you picked for everyone |
| Can you also offer a group plan? | No | Yes, but not to the same class of employees | — |
| Effect on the employee's tax credit | Credit reduced by the monthly allowance, or lost if the allowance is “affordable” | Taking the ICHRA forfeits the credit; an unaffordable offer can be declined to keep it | An affordable offer generally ends credit eligibility |
QSEHRA limits are for 2026 and are prorated for partial years. Want the group-plan column in more depth? See level-funded vs. traditional group plans.
Setting up an ICHRA, start to first reimbursement
Pick classes and set allowances
Decide who gets what — one amount for everyone, or different amounts for full-time, part-time or a second location. Allowances can rise with age (oldest no more than three times the youngest) and family size.
Give notice 90 days out
Employees get a written notice at least 90 days before the plan year starts. For a January 1 start, that means early October — so the design work happens over the summer.
Employees choose their own plans
The new allowance opens a special enrollment window, so employees can buy an individual plan off-cycle. This is where most ICHRAs succeed or fail: someone has to help each person pick.
Reimburse, tax-free
Employees show proof of coverage and submit premiums; the business reimburses up to the allowance. Reimbursements are deductible for the business and tax-free to the employee.
A QSEHRA runs the same way with fewer choices: one allowance for every eligible employee, the same 90-day notice, and the allowance reported on each employee's W-2 (box 12, code FF).
Why the state line matters more for an HRA than a group plan
With a group plan, everyone gets the same plan at the same price. With an HRA, every employee buys an individual plan, and individual plans are priced and sold by location. The Kansas City metro covers several pricing zones, called rating areas, in two states:
- Missouri rating area 3 covers Jackson, Clay, Platte and Cass counties, and premiums are the same across all four.
- Missouri rating area 1 includes Ray and Clinton counties and is more expensive: the 2026 benchmark silver plan there runs about 11% higher ($644.51 vs. $580.77 a month).
- Kansas rating area 1 covers Johnson, Leavenworth, Wyandotte and Miami counties.
The town of Lawson, where we have an office, sits right on the Ray–Clay line. Two employees living on opposite sides of that small town can pay about 11% apart for the same plan.
What that means for your allowance
An ICHRA lets you set a class for employees who work in the same rating area, so a business with a Liberty shop and an Olathe shop can set each location's allowance to match its local prices. A QSEHRA can't do that: it has to use the same terms for everyone.
County also decides which insurance companies sell there. For 2026, Blue Cross and Blue Shield of Kansas City and Oscar sell individual plans in Johnson County but not Leavenworth, and Blue Cross Blue Shield of Kansas sells in Leavenworth but not Johnson. An allowance that covers a good plan in one county may not cover the same thing one county over. We quote each employee where they live before you set a number.
When an HRA beats a group plan, and when it doesn't
An HRA tends to fit when
- You want a fixed, predictable benefits budget instead of a renewal increase every year.
- Your team is spread out (different counties, both states, or remote) and one network won't fit everyone.
- You have too few employees to meet a carrier's group participation rules.
- Some of your employees have health conditions. Individual ACA plans can't charge them more, while a level-funded group plan prices in the group's health.
- You want to cover part-time or seasonal staff differently from full-time staff (ICHRA).
A group plan tends to fit when
- Your team wants one shared network and plan, with no shopping on their own.
- Your employees are mostly older. Individual premiums rise with age, and a group plan spreads that cost more evenly.
- Your team is young and healthy enough that a level-funded plan could cost less and may refund money in a good year.
Mistakes we help employers avoid
- Setting the allowance before pricing the plans. A round number like $400 a month can be generous for a 28-year-old in Jackson County and thin for a 60-year-old in Ray County.
- Ignoring the tax credit. Since the extra marketplace subsidies expired after 2025, fewer employees qualify for large credits. That makes the allowance matter more. Some lower-income employees may still be better off declining an unaffordable ICHRA and keeping their credit, and they need to know that before they enroll.
- Missing the notice.The 90-day notice is required. If it's late, the plan year has to start later.
- Mixing a group plan and an ICHRA in the same class.That isn't allowed. When you mix them across classes, watch the minimum class sizes.
- Leaving employees to shop alone. An HRA is only as good as the plans people pick. We help each employee compare plans, check their doctors and prescriptions, and enroll.
ICHRA & QSEHRA FAQ
What is an ICHRA?
What is a QSEHRA?
Should a small Kansas City business choose ICHRA or QSEHRA?
Can employees pay the rest of their premium pre-tax?
Do employees lose their marketplace tax credit?
Can we offer an ICHRA to some employees and a group plan to others?
What happens if an employee has a health condition?
Is an ICHRA required to cover employees' families?
Has Congress changed ICHRA?
What does BBS charge to set this up?
The two ways to buy a group plan, and which teams come out ahead with each.
Group health insuranceHow we set up and run benefits for Kansas City teams of 2–50.
Individual & family plansThe marketplace and private plans your employees would choose from with an HRA.
- 26 U.S.C. § 9831(d): qualified small employer HRAs (Cornell LII) (opens in a new tab)
- IRS Rev. Proc. 2025-32 (2026 QSEHRA limits, § 4.63) (opens in a new tab)
- Final ICHRA rule, 84 FR 28888 (June 20, 2019) (opens in a new tab)
- 26 CFR § 54.9802-4: ICHRA classes and conditions (eCFR) (opens in a new tab)
- IRS Rev. Proc. 2025-25 (2026 affordability percentage, 9.96%) (opens in a new tab)
- IRS Rev. Proc. 2026-26 (2027 affordability percentage, 10.22%) (opens in a new tab)
- 45 CFR § 155.420: special enrollment periods for HRA participants (eCFR) (opens in a new tab)
- IRS: Health reimbursement arrangements (opens in a new tab)
General information, not tax or legal advice. Dollar limits and percentages are set by the IRS each year — we re-check them every fall, and your CPA has the final word on your own return.
