Today, a stand-alone Health Reimbursement Arrangement (HRA) – an HRA not tied to a group health insurance policy – is largely out of compliance with healthcare regulations.
But that could change. If the Small Business Healthcare Relief Act passes, the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) will join the menu of options for building stronger benefits packages.
Potential Benefits Recipe: QSEHRA + HSA
The QSEHRA –a type of stand-alone HRA which would not be available to businesses providing a group health insurance policy – could be used in combination with existing benefits offerings. Consider the Health Savings Account (HSA), which can be funded by employees and/or companies. While there have been rules for utilizing a stand-alone HRA and HSA at the same time in the past, a QSEHRA will be a new type of “excepted benefit”, and it is not yet clear if these same rules will continue to apply. At a glance, the QSEHRA and an HSA could appear redundant, but they may form a compatible pairing.
Splitting the Ownership of the Benefit
Instead of replacing your HSA contribution with an HRA allowance, if the SBHRA bill passes, you could educate your employees about the HSA, QSEHRA and any other benefits in your program. The 14th Annual MetLife U.S. Employee Benefits Trends Study underscored the opportunity for companies to offer guidance about available benefits, which may help reduce workers’ financial stress.
You might explain that while HSAs and QSEHRAs reimburse a similar list of qualified medical expenses, they also have some significant structural differences to consider. For example, HSAs are employee-owned. The employee opens the health savings account with a bank and has any deposited money available regardless of employment status. Additionally, anyone can contribute to an individual’s HSA: companies, employees, family, etc.
The QSEHRA is employer-owned. The company makes an allowance available (and is solely responsible for funding the allowance), and reimbursements are made for qualified medical expenses up to the allowance amount. If an employee leaves the company, the employee loses access to the QSEHRA.
HSA and QSEHRAs also have different eligibility criteria. An HSA requires employees to enroll in High Deductible Health Plans (HDHP) whose rules and requirements are updated annually. The QSEHRA, outlined in the SBHRA bill that is currently making its way through Congress, is structured to let employees shop for the individual health insurance policy that best meets their needs. As long as the policy offers minimum essential coverage, an employee can enroll in the company’s QSEHRA.
Although the ownership structures are different, the list of qualified medical expenses is nearly identical for an HSA and QSEHRA - so why bother offering both? Allowances companies make available to employees through the QSEHRA do not rollover year-to-year. This means that an employee either uses or loses the health benefit money. However, contributions made to an employee’s HSA are available to that employee for life - thus doubling as a retirement benefit.
Options make it easier for any business owner to a design a benefits package uniquely suited to a company and its employees, and if it passes, the SBHRA is poised to offer a new choice in the small business benefits arena.
Have you offered a HSA and HRA paired together? Tell us how it worked for you and your employees in the comments below.