Three health insurance reimbursement plans allow employers to reimburse employees for health insurance, and Take Command is here to walk you through them! Health insurance reimbursement is possible through a Health Reimbursement Arrangement or HRA. An HRA is an arrangement between an employer and their employees to reimburse for medical expenses and/or insurance premiums tax-free. The purpose is for employers to help their employees afford rising healthcare costs. Let’s look at the three health insurance reimbursement plans you should know.
Types of Health Reimbursement Arrangement Plans
First up, ICHRA. The Individual Coverage HRA was launched in 2020 and has grown in popularity ever since.
Our CEO, Jack Hooper, recently told BenefitsPRO that ICHRA represents a “fundamentally new model of how employers can provide benefits to employees.
ICHRA is available to companies of any size, boasts no annual contribution limits, and can be designed to include or exclude employees based on customizable class criteria (11 classes total). Employees must enroll in a qualified individual health insurance plan or Medicare Part A and B or Part C. With ICHRA, both premiums and medical expenses can be reimbursed. Plans can be designed to allow for premiums only or premiums plus expenses.
The next type of health reimbursement arrangement we want you to know about is the Qualified Small Employer HRA, a predecessor of ICHRA designed explicitly for small businesses. It's available to businesses with less than 50 full-time employees. It does have an annual contribution limit. For 2021, those limits are $5,300 per single employee and $10,700 per employee with a family. With QSEHRA, an employee must maintain MEC to participate. Both premiums and medical expenses can be reimbursed. Plans can be designed to allow for premiums only or premiums plus costs.
The third type of HRA to know is the Excepted Benefits HRA. It's available to companies of any size and has an annual contribution limit of $1800. Individual insurance premiums, including Medicare parts B and D, are excluded, however medical expenses are eligible for reimbursement. Dental, Vision, Long-Term Care, Nursing Home Care, Community-Based Care, Short-term (STLDI), COBRA are all eligible for reimbursement.
Types of Health Reimbursement Arrangement Plans
Standard HRA Plan
The Standard Health Reimbursement Arrangement, or HRA, is a cornerstone of employer-funded health benefits. It is a flexible way for employers to reimburse employees for medical expenses, including premiums, on a tax-advantaged basis. Employers can set reimbursement caps, making it a customizable option that can fit various business sizes and budgets. This type of HRA benefits employers and employees, allowing direct control over healthcare spending and providing financial relief for healthcare costs without additional tax burdens.
One of the key advantages of a Standard HRA is its ability to adapt to the unique health needs of each employee. Instead of offering a one-size-fits-all insurance plan, employers can allocate funds for employees to spend on healthcare expenses. This approach empowers employees to make their own healthcare decisions and encourages a more cost-effective use of healthcare services. Furthermore, standard HRAs can help attract and retain talent by enhancing the overall compensation package and providing a tax-efficient method to cover healthcare expenses.
ICHRA
The Individual Coverage Health Reimbursement Arrangement (ICHRA) is a relatively new option that significantly shifts towards personalized health benefits. By allowing employers to reimburse employees for individual health insurance premiums and medical expenses, ICHRAs offer flexibility and choice previously unavailable in employer-sponsored health benefits. There are no upper limits to employer contributions, and the arrangement can be tailored to offer different reimbursement amounts to various classes of employees, such as full-time versus part-time workers.
ICHRA's flexibility extends to compliance with the Affordable Care Act (ACA), providing a pathway for employers to meet healthcare coverage mandates while offering a benefit that employees can tailor to their needs. This customization can lead to higher employee satisfaction with their healthcare coverage, as they are not limited to the options provided by a group health plan. Additionally, ICHRAs can contribute to a more engaged and health-conscious workforce, as employees take a more active role in selecting their healthcare coverage and managing their health expenses.
QSEHRA
The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is specially designed for small businesses with fewer than 50 employees that do not offer group health insurance. This arrangement offers a streamlined way for small employers to provide health benefits without the complexities and costs associated with traditional health insurance plans. By reimbursing employees for qualified health expenses, including individual insurance premiums, up to a set annual limit defined by the IRS, QSEHRAs offer a viable health benefits solution that is both budget-friendly and compliant with healthcare regulations.
QSEHRAs embody a unique opportunity for small businesses to compete in the job market by offering valuable health benefits that attract and retain talent. This type of arrangement not only supports the health and well-being of employees but also aligns with the financial realities and constraints small businesses face. Moreover, the tax advantages associated with QSEHRAs—tax-free reimbursements for employees and tax-deductible expenses for employers—make this an attractive option for both parties, promoting a healthier, more sustainable workforce.
EBHRA
The Excepted Benefit Health Reimbursement Arrangement (EBHRA) allows employers to provide additional benefits to employees with primary health coverage. Designed to cover specific out-of-pocket expenses such as dental and vision care and, in some cases, short-term health insurance premiums, EBHRAs supplement a group health plan rather than a primary source of health coverage. With an annual contribution limit set by the IRS, EBHRAs provide a targeted benefit that can help cover gaps in primary health insurance coverage.
EBHRAs are particularly valuable in enhancing a company's overall benefits package, allowing employers to offer more comprehensive coverage without significantly increasing costs. This type of HRA can be a deciding factor for employees when choosing between potential employers, as it demonstrates a commitment to covering a wide range of healthcare needs. Additionally, EBHRAs are straightforward to administer, offering a hassle-free way for employers to provide additional benefits and for employees to receive reimbursements for qualifying healthcare expenses.
Integrated HRA
Integrated HRAs are designed to complement a traditional group health plan, offering employers a way to provide additional financial support for out-of-pocket medical expenses and deductibles. This arrangement is only available to employees enrolled in the company's group health insurance, ensuring that the HRA benefits work hand in hand with the primary health coverage. Integrated HRAs can be particularly beneficial in high-deductible health plan scenarios, where employees might face significant out-of-pocket costs before their insurance coverage fully kicks in.
By offsetting some of these costs, integrated HRAs can make health coverage more affordable and accessible for employees, enhancing the value of the employer's health benefits package. This type of HRA
How health insurance reimbursement plans work
At a high level, it’s pretty simple: The employer chooses an HRA for her company, sets a budget that works for them, and then lets the employers know they can use it. Once an employee pays for a medical expense or premium, they just turn in the receipt and submit it for reimbursement.
The important thing to remember is that every company is different. What one company needs vs. another can tell an entirely different story. The same can be said about their employees. Choosing an HRA solution to provide benefits for your staff is a choice best made informed.
Looking for more information?
Check out our FAQ pages for the EBHRA, ICHRA, and QSEHRA. We also have in-depth guides for HRAs, ICHRA and QSEHRA. You can bypass the reading and chat with one of our team of HRA experts! We are always standing by to help.
