June 9, 2020 at 8:00 AM •
Written by: Nick Green
A lot of employers who offer group health insurance have an itch. They know it’s not perfect, and the ways they’ve tried to scratch it in the past just don’t work. Offering the Rolls Royce of health plans would be great, but they can’t afford it. Supplementing employee costs by contributing to an HSA is a start, but you can’t choose what employees spend that money on, plus you pay into the HSA even if your employees don’t incur any medical expenses.
So how do you scratch that itch?
PeopleKeep’s Group Coverage HRA, sometimes called an integrated HRA, allows employers to offer tax-free money to their employees for their out-of-pocket expenses. Instead of employers paying upfront for potential future costs, they reimburse employees once those expenses are incurred. Employers can save on premiums by choosing a high deductible health plan while still providing excellent coverage.
Here are 7 rules you need to know if you're considering a Group Coverage HRA:
Rule #1: Employer eligibility
Any employer who offers a group health insurance plan that meets minimum essential coverage (MEC) requirements is eligible to offer a Group Coverage HRA. Unlike an HSA, it doesn’t matter if the plan has a high deductible or not.
Rule #2: Employee eligibility
Employees must be enrolled in your group health insurance plan to be eligible. They cannot participate if they decline coverage from your plan because they have coverage elsewhere or decide to go without.
In some cases, business owners are also eligible to participate. Check out our owner eligibility guide to see how eligibility varies by incorporation type and spouse’s W-2 status.
Rule #3: Employee classes
Employers have the ability to segment their employees into different classes based on bona fide job criteria. You can keep it simple with one class for all your employees or customize the benefit for each class. Some common classes are full-time and part-time; executives, managers, and staff; and salaried and hourly.
Rule #4: Allowances
There are no minimum or maximum allowance amounts. Decide for yourself how much your organization can afford to offer.
Rule #5: Deductibles
The Group Coverage HRA gives employers the option to require employees to pay a certain amount of money out of their own pockets before they can be reimbursed through their HRA. There are no limits to the deductible amount. While not required, this can help save on costs when budget is an issue.
Rule #6: Cost-sharing
Similar to coinsurance on an insurance plan, employers may also require employees to cover a percentage of any expenses they incur. You can set the percentage anywhere from 0% to 99% based on what you can afford.
Rule #7: Explanation of benefits requirement
Employers can choose to require employees to submit an explanation of benefits (EOB) in order for an expense to be reimbursed. If enabled, this feature limits eligible expenses to only those that your health insurance carrier covers. Otherwise, all expenses listed in publication 502, except for insurance premiums, are eligible for reimbursement.