There is a lot of confusion about how health reimbursement arrangements (HRAs) can be used under the current healthcare laws. The Affordable Care Act (ACA) did change the way HRAs can be used, so it’s important to stay informed, lest your business be found noncompliant.
Here are 10 FAQs about HRA Plans in 2017 and beyond.
1. What is an HRA Plan?
A health reimbursement arrangement (HRA) is a benefit plan that allows employers to contribute to their employees’ individual health insurance premiums and qualified out-of-pocket expenses by designating a specific allowance amount per employee per month. The employee submits receipts to a HIPAA-certified benefits administrator for review, and approved expenses are then added as a tax-free line item on each employee’s paycheck.
2. Are there Different Types of HRAs?
There are generally four types of HRAs that businesses can use today:
- Group coverage HRAs: These plans are paired with a group high deductible health plan (HDHP) in a similar way to health savings accounts (HSAs), but with the added benefit of having no limit on contributions.
- Retiree HRAs: These plans are used for people who have retired from your company.
- One-Person Stand-Alone HRAs: This type of HRA is not linked to any kind of insurance plan. It “stands alone” as a replacement for group health coverage all together and helps employees pay their individual health insurance premiums and out-of-pocket expenses. Under current regulations, it can only be used when one person is enrolled in the plan.
- Qualified Small Employer HRAs (QSEHRA): These HRAs are available to small businesses with fewer than 50 employees, and allow companies to offer the HRA as a stand-alone benefit.
3. Can My Small Business Use HRAs?
Most likely, yes, but it will depend on how your benefit plan is structured. If your business is looking to reimburse employees for their individual health insurance premiums and out-of-pocket expenses, then compliant HRAs are currently limited to the QSEHRA and the One-Person Stand-Alone HRA.
4. Who Can Contribute to an HRA?
5. Who Owns the HRA?
Employers, as they are the only ones making contributions.
6. What is the SBHRA?
The Small Business Healthcare Relief Act (SBHRA) is legislation that created the QSEHRA. It is sponsored by U.S. Senators Charles Grassley (R-IA) and Heidi Heitkamp (D-ND) and Congressmen Charles Boustany (R-LA) and Mike Thompson (D-CA).
7. What is the Status of the SBHRA?
The bill passed in December 2016 and was signed into law as part of the 21st Century Cures Act.
8. How Did the SBHRA Change HRAs?
Existing HRA regulations did not change. Instead, the bill created the QSEHRA.
The QSEHRA is be limited to only qualified small employers (49 full time equivalents or less). Additionally, job classifications can't determine the allowance amount designated to an employee — meaning that executives could not receive a larger contribution than entry-level employees. Finally the law would cap the annual amount that an employer could contribute to each employee ($5,150 for single coverage, $10,450 for families for 2019).
9. Will the law further expand HRAs?
Beginning in 2020, businesses will have a choice of two new HRAs: the excepted benefit HRA and the individual coverage HRA.
With the excepted benefit HRA, businesses can offer employees up to $1,800 per year for excepted benefits like dental and vision expenses or short-term health insurance policies. The individual coverage HRA (ICHRA), meanwhile, works as a stand-alone benefit and functions much like a QSEHRA without some of its restrictions.
10. How Can I Help?
If the two new HRAs would impact your business, be sure to contact the federal departments responsible for them as soon as possible. The letters, phone calls, and emails senators receive show them what is important to the small business community. If they see correspondence regarding HRAs, they may be more inclined to make it a priority.
Although the ACA changed the way that HRAs can be used, there are still four types of health reimbursement arrangements that companies can implement. New regulations coming in 2020 would expand that further.
Does your small business want to use an HRA? Download the eBook below to learn more!