If you’re offering (or thinking about offering) an ICHRA or QSEHRA, one question tends to come up pretty quickly: “What happens to my employees’ Premium Tax Credits?”
Premium Tax Credits (PTCs) are the subsidies that help lower-income individuals and families afford health insurance through the Marketplace. Since ICHRAs and QSEHRAs also help employees pay for individual coverage, there’s some overlap to sort out. The short version: you can’t double dip. But how each type of HRA handles that overlap looks a little different.
How QSEHRA Works with Premium Tax Credits
QSEHRA (for small employers with fewer than 50 full-time employees) plays nicely with Premium Tax Credits—but there’s a catch.
Employees can receive both, but their PTC gets reduced dollar-for-dollar by the amount of their QSEHRA allowance, as long as the QSEHRA is considered “affordable.” If it’s not affordable, employees can still get the full PTC, but their QSEHRA reimbursements will count
as taxable income.
Here’s how it works in practice:
- If an employee qualifies for a $400/month PTC and receives a $300/month QSEHRA allowance, their PTC drops to $100/month.
- The employee doesn’t opt in or out—the offset happens automatically at tax time (or when signing up for their plan).
- Employees are required to report their QSEHRA allowance to the Marketplace so their advance PTC can be adjusted.
How ICHRA Works with Premium Tax Credits
ICHRA takes a different approach; it’s more of an either/or situation. If an employee is offered an ICHRA that’s considered affordable, they can’t claim a Premium Tax Credit at all. Accepting the ICHRA dollars means declining any PTCs they may have been eligible for, full stop.
But if the ICHRA is unaffordable, employees have a choice. They can:
- Accept the ICHRA and skip the PTC, or
- Opt out of the ICHRA and claim the PTC instead
whichever ends up being more valuable for them.
An ICHRA is considered “affordable” if the employee’s share of the premium for the lowest-cost silver plan (self only) in their area is no more than a set percentage of their household income. That percentage is adjusted each year by the IRS. For 2026, the ACA affordability percentage is 9.96%. If their share of the premium is higher than that, the ICHRA is unaffordable, and the door to PTCs opens back up.
Related Article: IRS Increases 2026 ACA ‘Affordability Rate’ for Employer-Sponsored Healthcare
The beauty of the ICHRA opt-out provision is that it gives employees flexibility. Someone with a lower household income might find that a PTC stretches further than the employer’s contribution, and they get to make the call.
What This Means for Employers
If a good chunk of your workforce qualifies for Premium Tax Credits, the interaction matters quite a lot. A generous QSEHRA might unintentionally shrink an employee’s PTC to almost nothing. And an ICHRA that’s technically affordable takes PTCs off the table entirely for those employees.
That doesn’t mean either is a bad choice, it just means the design of your plan should take your team’s income landscape into account. The right contribution strategy can make sure your benefit actually feels like a benefit.
Let’s Model It Together
Figuring out how an ICHRA or QSEHRA will interact with your employees’ Premium Tax Credits isn’t something you have to do alone. Benafica helps you model different contribution scenarios and affordability thresholds so you can see exactly how your plan will land for your team, how it compares to your current plan, and keep you compliant with healthcare regulations.
If you’re ready to explore what works best for your business:
- Visit Benafica’s ICHRA or QSEHRA page and fill out the form at the bottom
- Call 651-287-3253
- Email hra@benafica.com