If you’re looking to provide a health plan to your employees, HRAs, Health Reimbursement Arrangements are a great cost-controlled way to offer healthcare benefits to your team. HRAs allow employees to choose an individual medical plan that fits their needs. But you may be wondering, what about spouses and dependents?
How do HRAs work for Families, Spouses & Dependents?
Many employers want to provide healthcare benefits for their employees for many reasons like recruitment, job satisfaction, and healthier employees. But employers also know it’s important to ensure spouses and dependents are a part of the equation when considering which healthcare plan is the right choice. This article will give a rundown of scenarios illustrating how health insurance HRAs can work for families.
Are employers required to offer health insurance to spouses and dependents?
No. Federal law does not require employers to offer health insurance. The only Affordable Care Act federal mandate for employers is those with more than 50 full-time employees have to offer affordable healthcare coverage.
Once health insurance is offered, the ACA says children can remain on their parent's health care plan until age 26. But it is not required that an employer offer health coverage to dependents.
Can an employee submit their spouse’s medical expenses for reimbursement?
Yes! It often depends on the plan design, but if the employer chooses an employee can submit their spouse’s qualified medical expense for reimbursement just like they would their own expenses. Since an HRA is a tax advantage, the IRS requires the employee to be legally married to their spouse to qualify for the reimbursement. This means partnerships not recognized by the federal government don’t qualify; for example, domestic partnerships and common law marriages.
Another requirement is the spouse must be covered by a certain type of health insurance plan to receive reimbursements for qualified medical expenses.
If the HRA is a QSEHRA, that means the spouse must have a health plan that meets Minimum Essential Coverage (MEC). MEC is any insurance plan that meets the ACA’s requirements of affordable health coverage. Read more about what qualifies as MEC.
If the HRA is an ICHRA, then the spouse must be on a qualified health plan. You can read more about ICHRA and qualified health plans here.
Can an employee submit their dependent’s medical expenses for reimbursement?
Yes! Same as with a spouse, it comes down to the plan design if the dependent is on a qualified health plan for the HRA. Employees can submit claims for their dependent’s qualified medical expenses. However, since dependents can be a broad term, here are a few specifics.
An Employee’s Child: A child can be a son, daughter, stepchild, foster child (placed by an authorized agency, or a descendant of any of them( think, grandchild). There is no need for proof of residency for the child, meaning your child could be married, living on their own, or have their own job. If you elect to keep them on your health coverage, you can up until their 26th birthday.
What constitutes a Qualifying Child?
Qualifying Child (Legal Ward): A qualifying child (or legal ward) must meet the following four criteria:
- Must have a specified relationship to the primary individual
- Must have the same legal residency as the primary individual for more than one-half of the taxable year
- Must be under age 19 (under age 24 if a full time student)
- Must not provide more than half of his/her own support for the taxable year
A dependent doesn't always have to be a child; it may sometimes be a relative.
What constitutes a Qualifying Relative?
Qualifying Relative: To be an eligible dependent as a qualifying relative, an individual must meet the following four criteria:
- Must have a specified relationship to the primary individual
- Must have a gross income for the taxable year less than the exemption amount defined in Code §151
- Must not provide more than half of his/her own support for the taxable year
- Must not be a qualifying child of the primary individual or any other taxpayer for any taxable year
Can an HRA pay for a spouse and/or dependents insurance premiums on the exchange?
Yes! With an ICHRA, Individual Coverage Health Reimbursement Arrangement, or a Qualified Small Employer HRA (QSEHRA), an employer can choose to allow different allowance amounts based on the employees’ age and family size. This higher reimbursement amount allows the employees to purchase family coverage on the exchange.
Can an HRA be used to reimburse a spouse's group health care premium?
The answer really depends on the type of HRA.
- For ICHRAs, the answer is a no. A group healthcare plan offered through a spouse’s employer is not eligible for an ICHRA allowance. An ICHRA requires healthcare plans be purchased from the individual marketplace. Learn how to choose between an ICHRA and a spouse’s plan.
- For a QSEHRA, if the employer chooses the employee may receive reimbursement for their spouse’s group plan premiums. However, there are few rules.
Only the portion of the group premium that the spouse's company does not pay for is eligible for reimbursement.
Since most group plans are already paid for on a pre-tax basis, the IRS doesn’t want people to “double dip” and also get a pre-tax QSEHRA reimbursement.
As a result, QSEHRA reimbursements for premiums on an employer group plan will likely be paid on a taxable basis, unless your employee can show that your spouse paid the premiums post-tax.
What if both spouses have their own HRA?
It’s perfectly legal for each person in a federally legal marriage to have their own HRA. However, both parties will want to be cautious when it comes to what items they submit for claims to ensure they are not being reimbursed twice for the same expense.
Still need help figuring out HRA benefits for spouses, families and dependents?
We're here to help! Chat with us at the bottom right hand corner of your screen or email support@takecommandhealth.com. We've be happy to help.
In the meantime, here are a handful of helpful HRA resources to tide you over:
→ Here’s even more info about how HRAs work!
→ Here's what happens to unused HRA funds.
→ Learn about the HRA IRS rules.
→ Learn about Health Reimbursement Arrangement Rules for ICHRA and QSEHRA.
