Choosing the Right Health Benefits Model for Your Small Business Clients
QSEHRA vs. Level-Funded vs. ICHRA
By Mark Mixer, CEO of HRA Simple
If you’ve ever stared at a spreadsheet wondering whether QSEHRA, Level-Funded, or ICHRA is the best fit for your client—or your own company—you’re not alone. We talk to brokers and small business owners every day who are trying to answer the same question:
“How do I know which benefits path is right for us?”
The answer? It depends on your size, goals, risk tolerance, and growth plans. And sometimes, it just takes a guide who can help you see what you can’t yet see.
So let’s walk through the key differences—clearly and without the jargon—so you can make confident, strategic decisions.
QSEHRA: Qualified Small Employer HRA
What it is: A simple, tax-free reimbursement model available only to businesses with fewer than 50 full-time employees, and only if they don’t offer a group plan.
Best for: Small, in-person teams looking for a straightforward way to offer a benefit without overcomplicating operations.
Real-Life Fit: Sweet Roots Bakery
A local bakery with 9 employees chooses a QSEHRA. It lets them reimburse employees for individual plans—$5,850/year for individuals, $11,800/year for families—without offering a traditional group plan. The setup is easy, and employees choose their own coverage.
Strengths:
Simple to set up and manage
Predictable costs due to IRS contribution caps
Works well for teams all based in one place
Limitations:
Contribution caps can limit impact for families
One-size-fits-all model—no employee class customization
Can’t be used alongside a group plan
Level-Funded Plans: Familiar, but Risky
What it is: A self-funded group plan with a fixed monthly payment. If claims stay low, employers may receive a refund. If not, stop-loss insurance helps manage the overage.
Best for: Mid-sized businesses with relatively healthy teams and someone in-house who can handle compliance complexity.
Real-Life Fit: Atlas Creative Agency
This 30-person marketing firm likes the idea of potential refunds and goes with level-funded. It works for two years—until several high claims drive up renewal costs and create serious budget strain.
Strengths:
Potential refunds if claims are low
Feels familiar to employees
Offers access to provider networks
Limitations:
Renewal surprises can hit hard after high-claim years
Complex compliance and administrative requirements
Narrower choice for employees
A plan that feels comfortable on the surface can hide deeper volatility underneath. That’s why strategy matters.
ICHRA: Individual Coverage HRA
What it is: A highly flexible, tax-advantaged way for employers of any size to reimburse employees for individual coverage premiums and qualified medical expenses.
Best for: Employers looking to scale, support remote or hybrid teams, and give employees real choice.
Real-Life Fit: Nimbus Software
A remote-first startup with 65 employees across 6 states opts for ICHRA. They tailor benefit levels by location and job type, giving each employee a plan that actually fits their life. The company gets budget control, compliance support, and scalability.
Strengths:
No contribution caps
Flexible across roles, locations, and work types
Tax-free for employer and employee
Adapts easily as a company grows
Limitations:
Employees must purchase their own plans (though we guide them through it)
Not compatible with traditional group health coverage
Requires upfront planning and employee communication
So Which One Is Right for You?
QSEHRA, Level-Funded, and ICHRA each have a place in the right situation. The key is understanding which model fits your reality—and your future. That’s where a good conversation becomes invaluable.
Whether you’re a small business owner trying to offer benefits without breaking your budget, or a broker looking to bring strategic insight to your clients, knowing the pros, cons, and ideal use cases of each option gives you an edge.
And when you can pair that knowledge with a benefits partner who knows how to guide you through implementation, you’re not just choosing a plan. You’re building a stronger, more sustainable business
Why ICHRA Deserves a Closer Look
While each model has its place, ICHRA is the only one built to grow with you—no matter your size, structure, or how the market shifts. It offers unmatched flexibility, complete budget control, and lets your employees choose plans that actually work for their families and doctors.
With no caps, full tax advantages, and class-based customization, it’s an alternative to traditional group plans and a strategic upgrade.
If you’re looking for a future-proof way to care for your team without getting crushed by rising costs, ICHRA is the model to explore.
We make it simple. Our team at HRASimple will help you figure out if QSEHRA, Level-Funded, or ICHRA is right for your business or your clients’. No pressure. Just clarity.
👉 Schedule a call to get started.
We'll help you align your benefits strategy with your budget, your team, and your future.
That’s what we call benefits with value.
