What You Need to Know About Health Insurance For Your Nanny
If you’ve been thinking about offering health insurance to your nanny, there are a couple of great options you can explore. You have two choices: the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) and the Individual Coverage Health Reimbursement Arrangement (ICHRA).
Including health insurance as a perk doesn’t just benefit your nanny: it helps you out, too. Many nannies look for health insurance as part of compensation, making you an attractive employer to potential nannies. You also want your nanny to stay healthy and happy so they can perform their job well. Health insurance can help when they need it, plus give them peace of mind.
Let’s discuss your health insurance options and other details you need to know.
All about QSEHRA
QSEHRA is targeted towards small employers like you who want to offer health insurance to their nannies without the headache of providing a traditional group plan. How does it work? In a nutshell, your nanny pays for their own health expenses and you reimburse them.
When you choose a QSEHRA, you design your own plan and set reimbursement allowances. Your nanny pays for their own medical bills — co-pays, prescriptions, premiums, etc. — and submits receipts to you. You’ll then reimburse your nanny up to the limit you initially set.
You have to decide how much you’d like to contribute before the calendar year begins, so now is a good time to start thinking about a QSEHRA as an option. You can contribute up to $5,250 annually per employee, so if you have multiple nannies, that’s your maximum for each nanny.
All about ICHRA
Like a QSEHRA, an ICHRA allows you to reimburse your nanny for their expenses instead of buying their insurance outright. You’ll also design your own health insurance plan, but you can offer a variety of reimbursement amounts to your nanny. They’ll choose which one they want.
Compared to a QSEHRA, an ICHRA offers more flexibility and higher limits to employees. There’s no limit to how much you can contribute as an employer, so if your nanny has high insurance premiums or expenses, an ICHRA may be a better option for them.
It’s important to note that under an ICHRA, your nanny can’t also be covered under their spouse’s health insurance plan. Your nanny also can’t get a health insurance policy from the government with an ICHRA. If one or both situations apply to your nanny, they might like to consider a QSEHRA instead.
Other details you need to know
- Both QSEHRAs and ICHRAs are Health Reimbursement Arrangements, or HRAs. They’re not the same thing as Health Savings Accounts or Flexible Spending Accounts, which are bank accounts people use to set aside money for and pay medical expenses. You choose how you’d like to handle the money part of reimbursements.
- Whether you go with a QSEHRA or an ICHRA, your nanny must have health coverage in order to be reimbursed through your arrangement.
- Enrollment can begin at any time of the year. You offering either a QSEHRA or an ICHRA for a new nanny is considered a “qualifying event. They don’t have to wait until that narrow window of open enrollment; they have 60 days to enroll instead.
- Both QSEHRAs and ICHRAs are tax-advantaged HRAs. That means that the money you contribute is not subject to employer taxes or employee taxes. You’ll need to report reimbursements on your nanny’s W-2 in order for it to stay tax-free.
Have more questions on health insurance for your nanny?
Take Command Health has great comprehensive resources on setting up a QSEHRA and setting up an ICHRA. We also have a partner at Homework Solutions who offers our families assistance with nanny healthcare plans.
And if you have more questions, A Perfect Fit can help! We’re not licensed tax pros, but we can still help you decide between a QSEHRA and an ICHRA and talk to you about the benefits of offering your nanny health insurance.
Send us an email or give us a call at one of our locations — including our NEW Miami location! — and we’d be happy to help you out and get you started with the nanny employment (and coverage!) process.