As a business owner, you may consider providing your employees health benefits through a Health Reimbursement Arrangement (HRA). As you look into setting up the HRA, you may be wondering if you, the business owner, are eligible to participate in the plan for either yourself or family members. The Answer: it all depends on how your business is set up!
The small business HRA (also known as a Qualified Small Employer HRA, or QSEHRA) was created when the bipartisan 21st Century Cures Act was signed into law by President Obama. It's a new type of health reimbursement arrangement specifically designed to help small businesses afford competitive benefits packages for employee recruitment and retention.
In the past, small business owners with fewer than 50 employees were not eligible to participate in HRAs but now there is small business HRA designed just for you called a QSEHRA.
QSEHRA allows small businesses to reimburse their employees for individual health insurance tax-free.
In order for a business owner to be eligible to participate in a QSEHRA as an alternative to small business health insurance for owners, they must be considered an employee of the business.
Yes! And it's tax free.
Small business HRAs are sometimes referred to as defined contribution health insurance or 401(K)-style benefits. Defined contribution means the business owner sets an amount each month to reimburse employees for their own individual policies. Many small businesses have been doing this, but in the past you'd have to pay payroll taxes and employees would have to pay income taxes, which knocks out a lot of the value.
In contrast to small group plans, which are expensive, one-size-fits-all and unpredictable, this new employee insurance model allows the business owner to control the monthly costs while still offering a great benefit.
The way small business HRAs work is streamlined and simple. Here's how.
The result?
With a small business HRA, the employer has predictable costs for their employees’ coverage, can avoid the hassle of selecting and managing a group plan, and is effectively out of the health insurance business.
There are a few factors to consider when deciding on benefits for your company. If you are planning on growing, it's good to have a benefits plan in place. A small business HRA is a scalable benefit, meaning it can work for a (very) small company all the way up to 50. And even when you hit 50 employees, there is another HRA called an Individual Coverage HRA that will allow you to continue to reimburse employees in a similar way.
Certain markets are better set up for widespread adoption of small business HRAs. Things to consider are how many carriers are in your area, what the premium trajectory has been, or what the average premium costs are.
If you are searching for a hassle-free way to offer affordable benefits, a small business HRA is certainly worth considering. Use our QSEHRA tax savings calculator to see how much you could save, or take a spin with our QSEHRA plan designer tool to see what your monthly costs would look like.
If you're ready to get started, setting up a small business HRA is a breeze! Our team is here to help clear up any confusion surrounding small business health insurance options. Don't hesitate to give us a shout via our chat feature on the website. We would be happy to help.
As you can see, the way a business is set up affects if the business owner and their dependents will qualify to participate in the small business HRA. Take Command has a team of experts ready to answer your questions regarding your HRA and health insurance options.
Hungry for more? Check out the requirements chapter in our handy QSEHRA Guide!
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