One of the most sought-after benefits for any employee is health insurance coverage. For household employers, it can be difficult to find health plans for a single employee with manageable premiums and good benefits. But our payroll and HR partner, GTM Payroll & HR, provides a look at a couple of practical and cost-effective ways to offer health insurance to your nanny.
As a household employer, offering competitive benefits is one of the best ways to attract and retain top-tier nannies and household staff. Among these benefits, health insurance frequently ranks at the top of a caregiver’s priority list.
However, purchasing a traditional group health plan for a single employee is often impractical, costly, or impossible because of minimum participation requirements.
Fortunately, tax-advantaged reimbursement arrangements allow household employers to help pay for their nanny’s health insurance and medical expenses tax-free. Two of the most popular options are the QSEHRA (Qualified Small Employer Health Reimbursement Arrangement) and the ICHRA (Individual Coverage Health Reimbursement Arrangement).
Here is a breakdown of how QSEHRAs and ICHRAs work, how they compare, and how you can choose the right option for your household.
What is a Health Reimbursement Arrangement (HRA)?
An HRA is not traditional health insurance. Instead, it is an employer-funded, tax-advantaged benefit plan that lets you reimburse your nanny for personal health insurance premiums and/or qualifying medical expenses up to a designated monthly allowance.
Key tax benefit: Reimbursements made through an HRA are tax-deductible for the employer and tax-free income for the employee, saving both of you money compared to a standard wage increase.
Understanding QSEHRA vs. ICHRA
Qualified Small Employer HRA (QSEHRA)
Designed specifically for small employers (those with fewer than 50 full-time employees) who do not offer a group health insurance plan.
Eligibility
Available to full-time and part-time household employees.
Contribution Limits
Capped annually by IRS guidelines. For 2026, the limits are $6,450/year ($537.50/month) for single coverage and $13,100/year ($1,091.66/month) for family coverage.
Coverage Requirement
Employees can use QSEHRA funds if they are enrolled in any minimum essential coverage (MEC), including individual plans, a spouse’s group plan, or certain parent plans.
Flexibility
Employers can choose to reimburse insurance premiums only, or both premiums and eligible out-of-pocket medical expenses (e.g., copays, prescriptions).
Individual Coverage HRA (ICHRA)
Introduced as a flexible alternative to QSEHRAs, ICHRAs are available to employers of any size and offer customized benefit structures.
Eligibility
Employees must be enrolled in an individual health insurance plan (purchased through the ACA Marketplace). Employees on a spouse’s group plan are not eligible for ICHRA reimbursements.
Contribution Limits
No IRS cap. Employers can offer as much allowance as their budget permits.
Flexibility
Employers can customize allowances based on employee classes (e.g., full-time vs. part-time), age, or family size.
Key Similarities
Tax Advantages
Both allow employers to provide tax-free dollars for healthcare expenses.
Budget Control
Both let household employers set a fixed monthly allowance that fits their budget.
Employee Choice
Both empower your nanny to choose the health insurance policy that best fits their personal medical needs.
Reimbursement Model
In both arrangements, the employee pays for their healthcare up front and submits proof of payment to receive tax-free reimbursement.
Key Differences Summary
Annual Contribution Limits
QSEHRA is capped by the IRS annually ($6,450 individual / $13,100 family in 2026), whereas ICHRA has no annual cap.
Spouse’s Group Plan Eligibility
QSEHRA allows employees to be reimbursed even if they are on a spouse’s group plan (provided it meets minimum essential coverage). ICHRA strictly requires the employee to have an individual plan.
Customization
QSEHRA requires uniform reimbursement terms across similar employees, while ICHRA allows higher customization by employee class (such as full-time vs. part-time status).
Which Option is Right for Your Household?
Choose a QSEHRA if
You want a straightforward option, your desired allowance fits within the 2026 IRS annual caps, or your nanny is covered under a spouse’s employer plan, and you still want to help cover their premiums or medical expenses. They can also purchase their own health plan on the health insurance marketplace.
Choose an ICHRA if
You want to offer a higher allowance than the 2026 QSEHRA cap allows, or if your nanny buys their own plan on the health insurance marketplace.
How GTM Can Help
Setting up and managing a compliant HRA requires adherence to specific IRS guidelines, proper documentation, and careful verification of receipts to maintain tax-free status.
At GTM, we take the hassle out of household employment management:
HRA Setup & Administration
We help you select and set up the right reimbursement arrangement (QSEHRA or ICHRA) for your employee.
Seamless Payroll Integration
We handle the tax-free reimbursement processing directly through your regular nanny payroll, keeping your tax filings accurate and compliant.
Expert Guidance
Our team of household employment specialists is available to guide you through IRS rules, tax savings, and employee benefit options.
Ready to Offer Health Care Benefits to Your Nanny?
Providing health care benefits is a powerful way to show your appreciation and keep your caregiver happy for the long term. Contact GTM today at (800) 929-9213 or complimentary, no-obligation consultation.
Hire Your Nanny from Us
Interested in having one of our great team of caregivers provide childcare in your home?
Our screening and placement process helps parents save time and feel more confident in their childcare search. Whether you need a caregiver for a few afternoons each week or more comprehensive support throughout the school year, A New England Nanny can help you explore your options.
Request a service or give us a call at (518) 348-0400 and we’ll provide a free consultation to get you the care you need.