As a business owner, you shape the health of your company and the well-being of your team. Implementing a Health Reimbursement Plan (HRP) gives you a dynamic way to provide medical expense coverage tailored to your employees' needs. Your customizable health benefits package can be one that reflects your company values and commitment to your team’s health and wellbeing.
There are many HRP options available, and each one offers its own unique benefits. So how do you know which way to go? Let’s walk through the types of health reimbursement plans so you’ll have a clear understanding of your options, and can make an informed decision about your health benefits strategy so your business stands out as a leader in employee health management.
A Healthcare Reimbursement Plan (HRP) is an employer-funded plan that reimburses employees for out-of-pocket medical expenses and, in some cases, insurance premiums. Unlike other health savings accounts, the funds come solely from the employer and are not deducted from an employee's salary.
The versatility of HRPs means they can be an excellent fit for a range of employer and employee scenarios.
Account-Based Health Plans like FSAs and HSAs involve employee and sometimes employer contributions, offer tax benefits, and provide employee control over funds, but are linked to high-deductible plans and have strict rollover rules. In contrast, HRAs are entirely funded by employers, offer reimbursements for eligible medical expenses without being tied to other plans, and boast greater flexibility without mandatory employee contributions.
With evolving healthcare needs and employer strategies, Health Reimbursement Plan offerings have diversified. Employers must grasp the different HRPs available—including HRAs, QSEHRAs, ICHRAs, and Integrated HRAs—to select the right fit for their business's unique needs.
The HRA is the foundational model from which other variants have stemmed. In this arrangement:
Tailored for small employers, QSEHRAs cater to companies that don't offer group health insurance to their employees. The distinct features of QSEHRAs are:
A relatively new entrant in the HRP world, ICHRAs came into being with regulatory shifts in recent years. Their uniqueness lies in:
These HRAs are combined with traditional group health insurance plans. The key characteristics of Integrated HRAs are:
EBHRAs are a specialized type of HRA with their own set of distinct features:
HRAs have emerged as a popular tool for employers to assist employees with their healthcare expenses. Whether you're considering implementing an HRA for your organization or you're an employee trying to understand how it can benefit you, it's essential to grasp both the advantages and the potential limitations of these plans. In this section, we'll explore the pros and cons of utilizing HRAs for healthcare payments.
Choosing to work with a seasoned HRA administrator such as Take Command can transform the way you approach HRAs. With their extensive expertise, they can guide you through the complexities of HRA management, turning potential challenges into advantages for your business.
Employer contributions to HRAs mark them as a distinct option in the array of health benefit offerings. If you’re exploring HRAs for your business, it’s important to recognize that these plans are exclusively employer-funded. We’ll address key questions around HRA contributions to clarify how they operate within your company’s healthcare benefits framework.
Employers decide the contribution to HRAs based on their budget, chosen HRA type, and benefits strategy, with potential variation across employee categories. For details on your specific HRA, consult your employer or HR department.
HRAs are exclusively employer-funded. This means only your employer can contribute to your HRA. Employees cannot make direct contributions to their HRAs, unlike Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs).
The contribution limits for HRAs largely depend on the specific type of HRA:
Traditional HRAs: There is no set maximum limit. The employer determines the contribution based on their health benefit strategy and budget.
QSEHRAs (Qualified Small Employer HRAs): These have set annual contribution limits that are adjusted for inflation.
ICHRA (Individual Coverage HRA): There's no maximum contribution limit. Employers can decide based on their budget and health benefit goals.
EBHRAs (Excepted Benefit HRAs): They have a specific annual contribution limit, adjusted yearly for inflation.
Annual QSEHRA contribution limits are adjusted for inflation by the IRS. The latest update caps self-only coverage at a certain amount and family coverage at a higher threshold. For current limits, consult the latest IRS guidelines or speak with an HR/benefits expert.
HRAs offer a flexible and tax-advantaged way to manage healthcare costs for both employers and employees. Whether you're considering a traditional HRA, a QSEHRA, an ICHRA, or just seeking clarity on your current plan, understanding how HRAs work is vital in maximizing their potential. If you have further questions or need personalized advice on selecting or managing your HRA, don’t hesitate to reach out to our expert team.
Take command of your healthcare expenses — contact us today to ensure your HRA is working optimally for you and your family.
Funds in an HRA are accessed through reimbursement. Employees pay for eligible expenses upfront, submit a claim with necessary documentation, and then are reimbursed by the employer from the HRA.
The rollover of unused HRA funds depends on the employer's policy. Some HRAs allow unused funds to carry over to the next year, while others may have a "use it or lose it" policy.
The contribution amount is set by the employer. For QSEHRAs, there are specific annual contribution limits set by the IRS, while ICHRAs have no preset maximum contribution limit.
Yes, HRAs are often used in conjunction with health insurance to cover out-of-pocket expenses. ICHRAs specifically require participants to have individual health insurance.
For traditional HRAs, it's not always mandatory. However, for ICHRAs, participants must have individual health insurance coverage to receive reimbursements.
The HRA is owned by the employer. It's an arrangement for the employer to reimburse employees for medical expenses.
Typically, HRAs do not earn interest. They are accounts for reimbursement purposes, not savings or investment vehicles.
Eligible expenses generally include medical care costs as defined by the IRS, such as doctor visits, medications, and surgeries. The specific eligible expenses might vary based on the employer's plan design.
Yes, many HRAs allow employees to use funds for the qualified medical expenses of dependents, such as a spouse or children. Always refer to your specific HRA plan details.
The maximum reimbursement is typically the total amount contributed to the HRA for the year. For QSEHRAs, specific annual limits apply, while other HRAs might have different limits set by the employer.
Unused funds in an HRA typically remain with the employer when an employee leaves or retires. However, specific policies can vary, so it's crucial to consult your HRA agreement or HR department.