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Small Business Employee Benefits and HR Blog

How List-Billing Works with HRAs

May 23, 2012
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How List-Billing Works with HRAsMany Health Reimbursement Arrangement (HRA) providers do not allow the use of List-Bill arrangements with HRAs because list-billing creates potential HIPAA/ERISA violations for the employer (See See Why Business Should Never Pay for Individual Health Insurance for more information).

Some insurance companies allow companies to set up List-Billing for their employees. List-Billing is a process that allows an employer to facilitate employees' purchase of individual health insurance policies via post-tax payroll deduction.

Under a list-bill arrangement, a health insurance carrier sends an employer a single bill for each employee's personal health insurance policy.

The employees (not the employer) pay their premium in full, usually through payroll withholding (post-tax), and the employer transmits the payment to the insurance company on behalf of the employee.

Essentially, the employer serves as a facilitator for the premium payments, but under federal law is not permitted to contribute to the premium. Under List-Billing, because the employer does not contribute to the premium, and the individual owns the insurance policy, group policy requirements do not apply. The individual is covered by the terms of their individual policy.

With a Health Reimbursement Arrangement (HRA) (when List-Billing is not involved), employees:

  1. Purchase their own individual health insurance policy;

  2. Make payment to the carrier (via ACH transfer, check or credit card) for their individual health insurance premium;

  3. Submit a health insurance premium claim to the HRA with proof of payment (e.g. bank statement, credit card statement or carrier receipt); and

  4. Receive tax-free reimbursement from their employer via check, payroll addition, or direct deposit.

In a List-Billing scenario, the only difference is #2 (above), the employee's method of premium payment. The employee must still submit claims for reimbursement of their insurance premium to the HRA.

Rather than paying the carrier directly via ACH transfer, check or credit card, the employee pays the carrier indirectly (through their employer) via payroll withholding (post-tax). Nothing changes as far as the HRA is concerned.

With an HRA (when List-Billing is involved), employees:  

  1. Purchase their own individual health insurance policy;

  2. Make payment to the carrier through their employer (via post-tax payroll withholding) for their individual insurance premium;

  3. Submit a health insurance premium claim to the HRA with proof of payment (e.g. payroll stub showing withholding or carrier receipt); and

  4. Receive tax-free reimbursement from their employer via check, payroll addition, or direct deposit.

The Comprehensive Guide to the Small Business HRA

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