In today’s world, 74% of employees agree that having health insurance benefits provides peace of mind for the unexpected and increases loyalty to their company. They also prefer customized benefit options based on their personal needs. Sounds like there are a lot of good reasons to opt for a QSEHRA (defined contribution model) over a traditional one-size-fits all group benefit plan. But how do you explain this new concept to your employees? Communicate early, often and in writing. Here are a few tips.
How to explain QSEHRA to your employees
Communication is key
The provisions of the 21st Century Cures Act and the rules and requirements surrounding small business HRAs (QSEHRAs) can be hard to understand (and we all know how confusing health insurance is in general!). That’s why lawmakers included very specific requirements on how small business owners communicate to their employees. Just remember, it must be in writing.
Here’s what you are required to communicate:
- How much contribution an employee is eligible for in that given year
- How employees need to communicate their contribution amount to any health insurance exchange to which they apply for advance payment of the premium assistance tax credit.
- Help them understand that if the employee is not covered under minimum essential coverage (MEC for short) for any month, the employee may be subject to tax for that month and reimbursements under the arrangement may be includible in gross income.
→ Check out our post on where to buy MEC for QSEHRA Plans.
→ More on QSEHRA health insurance plans
Did you get the memo?
Explaining the fine points of the QSEHRA early and often will help your employees understand and get the most out of this new benefit. Any of the standard methods of written communication in your company are acceptable, from memos to brochures to emails. As long as you answer the following questions:
- What is an HRA and what is individual health insurance?
- How will your employees find and purchase individual insurance? Beware: federal rules prohibit employers from being involved in the actual choosing of an employee's provider or policy. The good news is Take Command can help them make a smart decision based on their needs.
- If you have an existing group healthcare policy, when will it be cancelled and when will the HRA take effect?
- Why is the company making this switch? What are the benefits for both employer and employees?
→ Use our Market Snapshot tool to show your employees an overview of the plans available in their area.
Help your employees make the most out of their QSEHRA
Communication doesn't end once you send a staff email stating that they are eligible to participate in the small business HRA. Here are a few tips to share with your employees so they get the most out of their small business HRA.
Sign up ASAP
Don’t let that email get buried in your inbox. Your plan starts the day you enroll, so if you wait a month to get started you will lose out on a whole month’s worth of reimbursements! All you need to sign up is a few minutes to fill out the enrollment application and include proof of insurance (either a monthly bill or copy of ID card will do).
If you currently don’t have health insurance or your employer is cancelling your group plan and replacing it with the HRA, Take Command can help you find your new plan. Our database will help you shop and compare plans in your area that include your doctors and prescriptions. Our tool is free and easy to use! The nice thing about the HRA is it allows you greater flexibility in choosing a health plan that fits your needs versus an employer sponsored group plan that might not.
Submit Expenses
Once you are enrolled you can begin submitting expenses. Your plan agreement will include a list of items that can be reimbursed such as: monthly premiums, medical expenses (including LASIK), and over-the-counter medications. You should also pay close attention to the list of items that are not approved for reimbursement. If you cannot tell an item is eligible for reimbursement, submit it and see what your plan administrator says. You don’t want to leave money on the table!
Make sure you keep receipts of all your expenses as you will need to submit them each month for reimbursement! You can submit your expenses as often as you like during the course of the month.
Max out reimbursements each year
Remember, your employer is offering you the HRA as your health benefit. You will want to make sure that you max out their contributions for the year to take full advantage. The only way to receive their contributions is to submit your expenses. Don’t worry if you can’t reach your max reimbursement one month. The money will be carried forward to the end of the year.
Here's an example. Let's say your employer contributes $400 a month toward your health expenses. During the course of the month, you submit $350 in expenses. That leaves a balance of $50 which is carried over to the next month, meaning you would have $450 for the next month if you need it.
Just remember, any unused money at the end of the year will not be carried forward into the new year. The plan will start over at the new year.
Receiving your reimbursements
Your reimbursements will be added into your paycheck. You can check your reimbursement amount on your pay stub. Reimbursements are not subject to payroll taxes and you should see the entire amount added to pay.
Once you begin using your HRA you will see how convenient and easy it is to be reimbursed for your medical expenses.
Take Command is here to help
Does all of this sound confusing? Not sure where to start? We offer support for you as a business owner as well as your employees. Our small business experts will take care of the details so you can go back to managing your business.
Here's how we can help.
For your employees:
- We offer a data-driven platform to help them pick the best on- or off-exchange plan based on their preferred doctors, unique needs and prescriptions.
- Our customized portal allows them to enroll in the HRA online, view their HRA documents, submit medical expenses (if allowed), access their membership benefits, and upload their proof of coverage for compliance checks
For you (as a business owner):
- We handle all the legal work and make tax season easy and painless
- Employee onboarding
- An easy and quick online signup process
- A customized admin portal for your business allows you to review and approve HRA documents, view monthly reimbursement reports, add/remove employees, manage subscriptions, update payment information, and see overview information about HRAs.
To learn more, check out the setup chapter in our handy new QSEHRA guide!
This post was originally published in 2017 and has been updated in 2023 to reflect the exciting changes going on in the HRA world.
