A qualified small employer health reimbursement arrangement (QSEHRA) is best described as:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A QSEHRA (qualified small employer HRA) lets an eligible small employer that does not offer group health coverage set aside funds to reimburse employees, tax-free, for the cost of individual market premiums and other qualified medical expenses. It is a consumer-directed arrangement under the tax code — distinct from a group plan and distinct from an HSA, which is individually owned and employee- or employer-funded. Reimbursements are excluded from the employee's gross income within statutory limits, and the arrangement must be offered on the same terms to all eligible employees. It is one of the small-employer options the exam contrasts with QHP and group coverage.
Why the other options are wrong
- B) A QSEHRA is not a group health plan sold through an exchange; it is an employer reimbursement vehicle for employees' individual policies, so this conflates two different coverage mechanisms.
- C) The QSEHRA is employer-funded and employer-managed, unlike an HSA, which is an employee-owned savings account, so this answer attributes the wrong ownership and funding structure.
- D) No federal grant pays small employers' premiums; the QSEHRA is funded entirely by the employer, so the grant description is a fiction.
Memory hook
QSEHRA = the small employer's reimbursement wallet for workers' individual premiums — tax-free, no group plan required.