As a small business owner, you have many responsibilities and a lot on your plate. If you’re thinking about how you can offer health benefits to attract and retain good talent, but adding group health insurance seems daunting, consider a Health Reimbursement Agreement (HRA). Save time and money while supporting your employees' health and well-being with an HRA for small businesses.
Let's jump to it.
What’s an HRA for small businesses?
We'll start with the basics. In this post, we will cover what is an HRA and how you use it, common types of HRAs, tax-free ways to save on benefits, and which HRA might be a good fit for your small business.
How does health reimbursement arrangement (HRA) coverage work?
First, you’ll decide which HRA is best for you. Take Command Health offers two types, more on that below. Then, you’ll work with an HRA administrator to facilitate the program (and ensures HIPPA and IRS compliance) so you don’t have to spend time dealing with reimbursement claims.
While HRAs are not insurance (better, actually), the process of filing a claim for reimbursement is similar. Employees pay for their health expenses — including health insurance premiums and out-of-pocket medical costs — and you reimburse them for one or both, whatever you decide.
Here’s how an HRA plan works in four simple steps:
- Employers design their plans and set reimbursement allowances
- Employees pay for their health insurance and medical bills
- Employees provide proof of their expenses to your HRA administrator
- Employers reimburse the employee
An HRA gives employers flexibility and empowers employees to take charge of their health insurance plans. As a result, your employees get to select the health care plan that works best for them without being tied to a one size fits all plan many businesses offer.
It can be difficult to find health insurance plans that are affordable and reasonable for both you and your team. With an HRA, you can remove the headache of traditional business-offered health insurance plans and put the power back into the hands of your team by providing reimbursements for qualified health care expenses.
A new way to offer health benefits
In the post-pandemic work landscape, companies are balancing a combination of remote workers, contractors, and full and part-time employees with hybrid schedules. This new way of work is ushering in a new way of approaching healthcare and managing teams.
The Take Command HRA platform provides an easy-to-use dashboard that onboards employees and helps them navigate the system where they can easily shop and compare available individual insurance plans and get set up with just a few clicks. Employees want and appreciate work flexibility, which transfers to employer benefits. With HRA plans, each employee selects the best insurance plan for them and controls the coverage level, then submits claims to the HRA administrator for reimbursement. At the same time, employers can quickly access their company information to effectively manage your plan, all while leaving the heavy lifting (and keeping the IRS satisfied) to us.
HRAs are increasing in popularity because they allow businesses of all sizes to offer an affordable alternative to their employees.
What expenses can be reimbursed by an HRA?
It’s up to each employer to decide what qualified medical expenses they will cover with their HRA account. Some commonly covered medical expenses include:
- Blood glucose monitors
- Blood pressure monitors
- Copays
- Dental care
- Hospital expenses
- Monthly premiums for qualified individual insurance plans
- Over-the-counter medicine
- Payments toward a deductible
- Prescription drugs
- Routine doctor visits
- Vision care, including eyeglasses, contact lenses and exams
What are the benefits of an HRA for business owners?
Companies of all sizes can provide more freedom by offering an HRA to all employees who want to participate in the arrangement. Each employee can use the HRA administration platform to shop for an individual insurance plan that makes sense for their health, budget, and family situation.
When you partner with an HRA administrator firm like Take Command Health, we’ll make sure your team understands the benefits of the HRA and how they can choose a healthcare plan that suits their needs — giving them complete control over their coverage, network, premium — and get reimbursed for qualified medical expenses such as copays, prescriptions and premiums. You can rest easy knowing your HRA administrator will ensure compliance and reporting, manage and process claims, handle employee communications and provide employer support.
Which HRA plan is best for your business?
Unlike traditional group insurance plans, choosing and offering an HRA to employees is straightforward. Take Command Health offers two HRA plans that will fit any business size or budget: Qualified small employer HRA (QSEHRA) and Individual coverage HRA (ICHRA). Here’s what you need to know to determine which HRA plan is best for your business.
Qualified small employer HRA (QSEHRA)
The qualified small employer HRA (QSEHRA) is made for small businesses with fewer than 50 full-time equivalent employees and works for all W-2 employees regardless of their insurance status. This is an excellent option for a small business ready to make their first health benefit offering or frustrated by limited options with group plans. A QSEHRA can reimburse employees for insurance premiums, out-of-pocket costs, or both.
What are the benefits of a QSEHRA for your small business?
Implementing a QSEHRA can unlock several significant benefits for a small business or non-profit compared to other options. Here are some of the benefits and reasons why we love them:
- Optimized benefits
- Tax efficiency
- Flexible design
- Freedom from group health plans
- Budget control
Individual coverage HRA (ICHRA)
The individual coverage HRA (ICHRA) works for employers of all sizes and is a great option if you have a remote workforce with different classes of employees in many states. With the individual coverage HRA, you can divide employees into classes (appropriate for a mixed workforce) to provide appropriate benefits and tax-free reimbursements for each employee type. Employers may offer an ICHRA as a standalone or alternative health benefit to employees who don’t qualify for your current group health insurance plan. An ICHRA can reimburse employees for qualifying individual health insurance premiums, out-of-pocket costs, or both.
What are the benefits of an ICHRA for your small business?
Implementing an ICHRA gives you recruiting power with benefits offered for a multi-class workforce. If you have different types of employees in various locations, an ICHRA is a great choice. Here are some of the benefits and reasons why we love them:
- Personalized plan options
- Tax efficiency
- Simple and flexible design
- No minimum participation requirements
- Budget control
Employee FAQs about HRAs
Q: If I use my employer’s HRA platform to research and buy an individual (or family) insurance plan and then leave the company, will I lose my insurance?
A: No, you keep the insurance – it goes with you wherever you go as long as you want to maintain that plan. Unlike employer-sponsored group health plans that tie you to the company to maintain health insurance, an HRA allows you to shop the marketplace to secure the best health plan for you that your company reimburses you for as long as you’re employed there.
Q: Do I have to enter the HRA my employer offers?
A: There are no participation requirements, and if you decide not to use the HRA it won’t affect the plan for your employer.
Q: How do I get money from my HRA account for medical expenses?
A: Since there’s no pre-funding of accounts (like an HSA or FSA) and the HRA is simply an “arrangement” between you and your employer, you can’t take funds out. Instead, you’ll submit a receipt for reimbursement for qualified medical expenses, and your employer will pay you back. The IRS Publication 502 outlines qualified medical expenses. Your employer may reimburse only for health insurance premiums, qualified medical expenses, or both.
A better way to offer employee health benefits
There are many positive benefits to HRA accounts for employers and employees alike. Let us take this off your plate so you can save time and money while supporting your employees' health and well-being with an HRA for small businesses. To get started, check out our HRA administration platform demo and find out how this intuitive platform can manage all of your HRA administration needs. Or contact our team to chat about which HRA plan works best for you.
