The following is an extract from our free eBook, The Comprehensive Guide to 
the Small Business HRA. Click here to download the full eBook, which will guide you through everything you need to know to start offering reimbursement benefits.
Between cost-savings for employers and competitive health benefits for employees, health reimbursement arrangements (HRAs) are a good choice for small businesses.
Established by Congress in 2016, the qualified small employer health reimbursement arrangement (QSEHRA) allows businesses with fewer than 50 employees to reimburse their employees for individual health insurance and other out-of-pocket medical expenses, up to a monthly amount determined by the company.
Here are three reasons why an HRA could be a great fit for your company.
HRAs Provide Value to Companies
One of the most pressing problems confronting small businesses today is the high cost of individual health insurance. According to the Medical Expenditure Panel Survey (MEPS) from the Department of Health and Human Services, the average cost of individual health insurance for an employee in 2001 was $2,889. In 2015, the cost had risen to $5,963, exceeding both inflation and wage growth.
This is where an HRA can help. By switching to an HRA, employers can:
- Fix your costs. With an HRA, the company decides in advance how much money to contribute to employees’ health insurance and can adjust allowances according to budget.
- Hire and keep employees. By offering comprehensive health benefits, businesses can hire top talent and keep valuable employees.
- Concentrate on your core business. Group health insurance is both costly and time-consuming to administer. With an HRA, employers can focus on what matters: running the business and making it profitable.
Individual Health Insurance Provides Value to Employees
Viewed side by side, HRAs offer employees two distinct advantages over group health insurance: choice and portability.
- Choice. With individual health insurance through an HRA, employees choose their own coverage, rather than having their company decide for them. Employees also choose which doctors they’ll see.
- Portability. Unlike group health insurance, individual health insurance is portable, meaning employees take their policy with them when they switch jobs.
|
Group Health Insurance |
Individual Health Insurance |
|
|
Who pays for the policy? |
The company buys the policy. Employees reimburse the company from their paycheck. |
Employees buy the policy. The company reimburses employees through their paycheck. |
|
Employees keep their policy when they switch jobs. |
No |
Yes |
|
Employees choose their coverage and doctors. |
No |
Yes |
|
Premium tax credits are available. |
No |
Yes |
|
Pre-existing medical conditions are covered. |
Yes |
Yes |
|
Essential health benefits are covered. |
Yes |
Yes |
Reimbursements Are Tax-Free
With an HRA, reimbursements are tax-free for businesses and employees alike, saving businesses 7.65 percent in payroll taxes and employees between 20 and 40 percent in state and federal income tax on money they spend on health insurance premiums and medical expenses through the HRA.
Conclusion
A QSEHRA provides significant value for both small businesses and their employees.
Download the eBook to learn more about how the QSEHRA can benefit your company and employees.
What questions do you have about the Small Business HRA? Let us know in the comments below.
