ICHRA and QSEHRA for Kansas Employers

Not every Kansas employer wants to run a group health plan. A health reimbursement arrangement lets you put a set amount toward each employee's own health insurance and medical costs, tax free, while the employee picks a plan on the individual market. There are two main versions for this: the QSEHRA and the ICHRA.

Here is how each one works, who can use it, and how it stacks up against a small group plan.

Where Kansas employees buy their own plan

Both arrangements depend on the individual market, so start there. Kansas does not run its own exchange. It uses the federal Marketplace, which means Kansans shop and enroll through HealthCare.gov. Employees can also buy individual coverage directly from a carrier.

Timing matters. HealthCare.gov's open enrollment for individual plans runs November 1 to January 15, and employees must pick a plan by December 15 for coverage to start January 1. That is why many employers start an HRA on January 1. A new hire can usually enroll outside open enrollment when they first get an HRA offer, but confirm the special enrollment rules with HealthCare.gov for each case.

The individual market in Kansas is priced by where the employee lives, not where you are. An employee in Garden City and one in Lenexa will see different plans and prices for the same HRA dollars.

QSEHRA: the small employer HRA

A Qualified Small Employer Health Reimbursement Arrangement is built for small firms that do not offer group coverage. HealthCare.gov lists the main requirements. A small employer generally must:

• Have fewer than 50 full-time employees, including full-time equivalents.
• Not offer a group health plan to any employee, including SHOP coverage or a health FSA.
• Offer the QSEHRA on the same terms to all full-time employees. Amounts can vary only by age and by the number of people covered.

Employees must have qualifying health coverage, such as an individual Marketplace plan, to get reimbursed tax free. They pay their premium or medical bill, send proof, and you reimburse them up to the limit.

2026 limits. IRS Rev. Proc. 2025-32 sets the 2026 QSEHRA maximum at $6,450 for self-only coverage and $13,100 for family coverage. HealthCare.gov shows the same figures, which work out to $537.50 and about $1,091.66 a month.

Notice. You must give current employees written notice 90 days before each plan year starts, and give new hires notice as soon as they become eligible. IRS Notice 2017-67 lists what the notice must say.

Tax credit effect. A QSEHRA reduces the premium tax credit an employee can claim on a HealthCare.gov plan. Lower-income employees may lose some or all of their credit, so run the numbers for your team before choosing an amount.

ICHRA: the individual coverage HRA

An Individual Coverage HRA has no employer size limit and no dollar cap. A 6-person shop in Hays and a 300-person manufacturer in Wichita can both use one. The rules come from 29 CFR 2590.702-2 and matching Treasury and HHS rules.

The main conditions:

• Each covered employee and dependent must be enrolled in individual health insurance or Medicare for every month the HRA covers them.
• You cannot offer the same class of employees a choice between an ICHRA and a traditional group plan.
• Within a class, the ICHRA must be offered on the same terms. Amounts can rise with family size, and with age, as long as the oldest worker's amount is no more than three times the youngest worker's.
• You must give written notice at least 90 days before each plan year, with shorter timing for new hires and new businesses.
• The HRA must check that each person is enrolled in individual coverage before it pays.

Employee classes in an ICHRA

Classes are what make an ICHRA flexible. The rule lists the classes you can use, such as:

• Full-time and part-time employees.
• Salaried and non-salaried (hourly) employees.
• Seasonal employees.
• Employees whose main worksite is in the same rating area.
• Employees in a waiting period, and employees under a collective bargaining agreement.

A rating area class can help a Kansas employer with staff spread across the state. Kansas has seven rating areas, and individual premiums in southwest Kansas do not match those in the Kansas City metro. A larger allowance for one area can track those price differences.

If you offer a group plan to one class and an ICHRA to another, minimum class size rules may apply to classes such as full-time, part-time, salaried, hourly and rating area. A new hire rule also lets you move only future hires to an ICHRA while current staff keep the group plan.

Affordability and the premium tax credit

An employee offered an ICHRA cannot claim a premium tax credit on a HealthCare.gov plan unless two things are true: the ICHRA is unaffordable for them, and they opt out of it. The IRS confirms this in its premium tax credit Q&A.

Affordability compares the cost of the lowest cost silver plan for self-only coverage where the employee lives, minus the monthly self-only HRA amount, against a share of household income. For plan years starting in 2026, IRS Rev. Proc. 2025-25 sets that share at 9.96%.

For employers with 50 or more full-time employees, including full-time equivalents, affordability also connects to the employer shared responsibility rules. The IRS counts you as an applicable large employer at that size. An ICHRA designed with those rules in mind can serve as the coverage offer, but the math needs care. Our large group guide covers the employer mandate side.

How an HRA compares with a group plan

Each route has a place. Here is the plain comparison.

• Cost control. With an HRA you set a fixed allowance. With a group plan, your cost moves with each renewal. See our Kansas rate tracker for recent filed changes.
• Plan choice. HRA employees pick their own individual plan. A group plan gives everyone the same short list.
• Network. Individual plans can use narrower networks than a group PPO. Check the network for each employee's county, which matters most in rural Kansas.
• Tax credit. A QSEHRA rules out the small business health care tax credit, since that credit generally requires SHOP coverage. See our tax credit guide.
• Older or sicker staff. Individual plans cannot turn anyone down for health reasons, but premiums rise with age, so a flat allowance covers less for older employees.
• Participation. A group plan may require a minimum share of employees to enroll. An HRA does not.

Picking the right fit in Kansas

A QSEHRA tends to fit a small firm under 50 employees with a modest budget and no group plan today. An ICHRA tends to fit a firm that wants class-by-class control or has outgrown QSEHRA limits. A group plan tends to fit when broad networks, one shared plan, or the tax credit matter most.

We can price a group plan and model an HRA allowance against your team's HealthCare.gov options side by side. Start with a census on our quote page.