A QSEHRA (Qualified Small Employer Health Reimbursement Arrangement) lets an employer with fewer than 50 full-time employees pay you back, tax free, for a health plan you buy yourself. For 2026 plan years the IRS caps the benefit at $6,450 for self-only and $13,100 for family coverage (Rev. Proc. 2025-32). As of October 27, 2026 the IRS has not published the 2027 caps, so this page does not estimate them.
The question agents hear most is what the money does to a Marketplace subsidy. Under the 2026 rules an affordable QSEHRA offer ends the premium tax credit, and an unaffordable one reduces it dollar for dollar. For the broader employer-offer picture, read what to do when your employer offers an HRA, QSEHRA or ICHRA and what an ICHRA is. This guide is for adults under 65.
Coverage Breakdown
Direct answer: what a QSEHRA is and what it does to your subsidy (2026)
It depends on the offer. A QSEHRA is a tax-free account a small employer (under 50 full-time employees, no group plan) funds so you can buy your own health plan. The 2026 limits are $6,450 self-only and $13,100 family. The IRS has not published 2027 limits. An affordable 2026 offer ends your Marketplace premium tax credit; an unaffordable one reduces it.
QSEHRA contribution limits: 2026 is set, 2027 is not published yet
QSEHRA limits are set by the IRS each year under section 9831(d) of the Internal Revenue Code. For plan years beginning in 2026 the maximum reimbursement is $6,450 for an employee with self-only coverage and $13,100 when the arrangement also reimburses family members' expenses (Rev. Proc. 2025-32, sec. 4.63). That works out to $537.50 a month self-only and about $1,091.67 a month for family in 2026. An employer may offer less than the cap, but it must offer the same amounts on the same terms to all eligible employees, with variation allowed only by age and family size.
The 2027 caps are not out. The IRS published the 2026 figures in Rev. Proc. 2025-32, its annual inflation-adjustment notice, and as of October 27, 2026 no 2027 version exists. Rev. Proc. 2026-24 (HSAs) and Rev. Proc. 2026-26 (premium tax credit percentages) are out, but neither sets a QSEHRA cap. Until the IRS publishes, 2026 limits apply to plan years beginning in 2026, and any 2027 figure you see online is an estimate. The caps are prorated by month if an employee joins midyear.
Who can offer a QSEHRA and who can receive one
A QSEHRA is open only to an employer that is not an applicable large employer, meaning it had fewer than 50 full-time employees (counting full-time equivalents) in the prior calendar year, and that offers no group health plan to any employee (Notice 2017-67). The money must come from the employer alone: salary reduction contributions are not allowed. The employer reimburses medical expenses, including premiums for an individual-market plan, after the employee shows proof of the expense and of coverage.
The employer must offer the QSEHRA on the same terms to all eligible employees. The plan may exclude employees with under 90 days of service, employees under age 25, part-time or seasonal workers, employees covered by a collective bargaining agreement, and nonresident aliens with no U.S. earned income. A written notice must reach each eligible employee at least 90 days before the plan year starts. For a January 1, 2027 plan year that deadline fell around October 3, 2026. The penalty for missing it is $50 per employee, up to $2,500 per year.
How a QSEHRA changes your Marketplace premium tax credit (2026 and 2027 coverage)
A QSEHRA is treated as affordable for a month when the self-only premium of the second lowest cost silver plan in your area, minus one-twelfth of your QSEHRA amount, is no more than one-twelfth of 9.96% of your household income for 2026 plan years (Rev. Proc. 2025-25). For 2027 plan years the percentage is 10.22% (Rev. Proc. 2026-26, sec. 3.02). If the offer is affordable you get no premium tax credit for those months, even if you never use the QSEHRA money (Notice 2017-67).
Hypothetical 2026 example: a single adult has household income of $30,000 in 2026. The benchmark self-only premium is $520 a month and the QSEHRA pays $200 a month. The net cost is $320, which is above $249 (9.96% of $30,000, divided by 12), so the offer is unaffordable. The adult can claim the premium tax credit, but it is reduced by the $200 monthly QSEHRA amount. With a $450 monthly QSEHRA the net cost drops to $70, the offer is affordable, and the credit is zero. These numbers are illustrations, not quotes.
Report the QSEHRA amount when you apply for Marketplace help. Since tax year 2026 there is no cap on repaying excess advance premium tax credits, so an unreported QSEHRA that makes you ineligible can mean repaying the full difference on Form 8962 (P.L. 119-21 sec. 71305). The 400% poverty cap also applies: for 2026 coverage it is $62,600 for one person, and for 2027 coverage it is $63,840.
Open enrollment, special enrollment and timing for a QSEHRA (2026-2027)
Open enrollment for 2027 Marketplace coverage runs from November 1, 2026 to January 15, 2027, and enrolling by December 15, 2026 starts coverage on January 1, 2027; confirm that date on HealthCare.gov because it is under court review. A QSEHRA offer can also open a Special Enrollment Period: HealthCare.gov says you may qualify if you or a household member were offered a QSEHRA or an individual coverage HRA within the past 60 days or expect an offer in the next 60 days. You must call the Marketplace Call Center to use it.
QSEHRA tax treatment, eligible expenses and plan types (2026)
QSEHRA reimbursements are not taxable income for any month you have minimum essential coverage. Without coverage for a month, reimbursements for that month are taxable (Notice 2017-67). Eligible expenses are medical care under section 213(d): premiums, deductibles, copays and other costs, as the employer's written plan allows. Individual-market plans are ACA-compliant, so they cover essential health benefits and cannot turn you away for a preexisting condition, which makes them a natural fit for QSEHRA money. The employer reports the annual amount in box 12 of your W-2 with code FF, and that figure is not taxable wages.
A QSEHRA can also reimburse Medicare premiums if the plan terms allow, including Medicare Part B, Medicare Part D, a Medicare Advantage plan or Medigap, though Original Medicare Part A is premium free for most people. Notice 2017-67 says reimbursing Medicare premiums does not by itself break the same terms rule, but a plan limited only to Medicare premiums may fail it. For workers under 65 the usual target is an ACA Marketplace plan or an off-Marketplace individual plan.
Alternatives if your employer does not offer a QSEHRA (2026-2027)
Adults whose employer offers no QSEHRA still have named options, and the right one depends on household income and what the employer offers. Each option below links to where to read more or apply.
- ICHRA: an employer of any size can fund an individual coverage HRA with no federal dollar cap. Read what an ICHRA is.
- Marketplace plan with the premium tax credit: with no affordable employer offer, household income of 100% to 400% of the poverty guidelines can qualify (see can I get an ACA subsidy with an employer offer). Apply at HealthCare.gov.
- Medicaid or CHIP: adults and children below their state's income limits can enroll year-round; check your state agency through Medicaid.gov. Medicaid work rules start in many states as early as January 2027.
- Spouse's or partner's employer plan: losing other coverage or marrying may open a 60-day Special Enrollment Period.
- Premium tax credit planning on the tax return: use the premium tax credit glossary entry and Form 8962 to reconcile any credit.
Next steps: how to check your QSEHRA offer and enroll (2026-2027)
Workers with a QSEHRA offer should follow the steps below before choosing a Marketplace plan for 2027, and should keep the employer's written notice because it is needed to calculate the credit on the tax return. The starting point for an application is HealthCare.gov.
- Step 1: Find the monthly QSEHRA amount in the employer's written notice (annual amount divided by 12).
- Step 2: Look up the second lowest cost silver self-only premium for your age and ZIP code on HealthCare.gov.
- Step 3: Run the affordability test: premium minus QSEHRA amount versus 9.96% of household income for 2026 plan years (10.22% for 2027).
- Step 4: Apply during open enrollment (November 1, 2026 to January 15, 2027) or within a 60-day Special Enrollment Period, and enter the QSEHRA amount when asked.
- Step 5: Submit receipts and proof of coverage to the employer for reimbursement, and reconcile the credit on Form 8962 when you file.
Frequently Asked Questions
What is a QSEHRA in simple terms?
A QSEHRA is a Qualified Small Employer Health Reimbursement Arrangement. An employer with fewer than 50 full-time employees and no group health plan reimburses you, tax free, for health costs such as individual-plan premiums, up to a yearly cap. For plan years beginning in 2026 the cap is $6,450 self-only and $13,100 family (Rev. Proc. 2025-32).
What are the QSEHRA limits for 2027?
The IRS has not published 2027 QSEHRA limits as of October 27, 2026. The 2026 limits are $6,450 self-only and $13,100 family, and the IRS normally releases the next year's figures in its annual inflation-adjustment revenue procedure. Do not rely on 2027 figures from blogs until the IRS publishes them.
Does a QSEHRA reduce my Marketplace subsidy?
Yes. If the QSEHRA is affordable under the 2026 test (9.96% of household income), you get no premium tax credit for those months. If it is unaffordable, you can still claim the credit, but it is reduced by your monthly QSEHRA amount. Tell the Marketplace the amount when you apply (Notice 2017-67).
Can I turn down a QSEHRA to keep my premium tax credit?
No. An affordable QSEHRA ends credit eligibility whether or not you use the money, according to IRS Notice 2017-67. This differs from an unaffordable ICHRA, which you can decline to keep the credit. If your QSEHRA is unaffordable, you keep a reduced credit and can still use the reimbursements.
Is QSEHRA money taxable?
Reimbursements are tax free for each month you have minimum essential coverage, such as a Marketplace plan. For a month without that coverage, the reimbursement counts as taxable income (Notice 2017-67). Your employer reports the annual QSEHRA amount in box 12 of your W-2 with code FF.
Does a QSEHRA offer give me a Special Enrollment Period?
Yes. HealthCare.gov says you may qualify for a Special Enrollment Period if you or someone in your household was offered a QSEHRA or individual coverage HRA in the past 60 days or expects one in the next 60 days. You must call the Marketplace Call Center to enroll using this reason.
How is a QSEHRA different from an ICHRA?
A QSEHRA is only for employers with under 50 full-time employees and has a federal dollar cap ($6,450 self-only and $13,100 family in 2026). An ICHRA can be offered by employers of any size, has no federal cap, and allows different amounts by employee class. See the CoveredUSA ICHRA page for the full comparison.
Which employers can offer a QSEHRA?
Only an employer that is not an applicable large employer, meaning fewer than 50 full-time employees including full-time equivalents in the prior year, and that offers no group health plan. The employer must fund it alone, offer it on the same terms to eligible employees, and give written notice 90 days before the plan year.
