Group health insurance is a common way for organizations to provide employees the health coverage they expect from their employer. However, the health reimbursement arrangement (HRA) is another option employees can use to get their medical expenses covered through their employer. So which should your organization use—group health insurance or an HRA?
Thanks to the group coverage HRA (GCHRA), employers can offer both group health insurance and an HRA together to give their employees even more ways to access affordable care.
In this article, we’ll go over how group health insurance can be used with a GCHRA, what expenses a GCHRA covers, and how the combination of group health insurance and a GCHRA can make your medical expenses more affordable.
What is the group coverage HRA (GCHRA)?
The GCHRA, often called an integrated HRA, is a reimbursement arrangement between an employer and their employees to help pay for the out-of-pocket costs that aren’t covered in the group health insurance plan.
Unlike a traditional integrated HRA, employers aren’t restricted to compatible plans through any individual provider. Plus they can keep their HRA even if they change insurance providers.
Many employers offering a traditional group health insurance plan face annual rate hikes and high premium costs that are often difficult to manage. In these cases, offering a high deductible health plan alongside a GCHRA can help bridge the gap between offering a group plan and minimizing premium costs.
What can I get covered through a GCHRA?
While your group health insurance plan will cover portions of your doctor’s visits, dentist appointments, prescriptions, and other health costs, you can use your GCHRA allowance to cover many things your insurance doesn’t.
Qualifying medical costs
The GCHRA covers a wide range of items that your insurance may not cover in full, or at all, including prescriptions, cold medicine, bandages, glasses, sunscreen, and so much more.
All you have to do is pay for these items like you normally would, then submit the receipt for reimbursement with your employer, and you’ll receive a tax-free reimbursement on your next paycheck or through a direct deposit.
If your group health insurance requires a copay for doctor’s visits, you can also get that charge reimbursed tax-free through your GCHRA.
For example, let’s say you go to the doctor and receive a charge of $100 for the visit. While your insurance covers the cost of the visit, you’re still charged a $20 copay. Rather than paying for that charge on your own, you can use the money from your GCHRA allowance to get it reimbursed.
Most group health insurance plans require a deductible to be paid before your insurance will cover anything—that’s where your GCHRA comes in handy, especially with high deductible plans.
Before you meet your deductible, you can use your tax-free dollars from your GCHRA until your deductible is paid in full and your insurance starts covering your medical costs, or until you’ve used all of the funds from your GCHRA allowance—whichever comes first.
Although, depending on how your employer designs your benefits plan, you may also have a deductible on your GCHRA in addition to your group health insurance that you need to meet before you can use your allowance. We’ll cover that next.
Do I have to pay for anything out of pocket with a GCHRA?
While it depends on how your employer chooses to design the benefit, you’ll likely pay for a few things on your own in addition to the things you can get covered.
With the GCHRA, employers have the unique ability to control costs beyond the allowance by setting up a deductible. They can set any dollar amount (usually between $150 and $500) that employees must personally meet with their healthcare costs before being eligible to receive reimbursements.
Along with the deductible, employers can choose a percentage that employees are responsible for. So with each expense that’s considered reimbursable, employers can define a percentage that employees must cover on their end.
For example, an employer could choose to cover 85% of all expenses up to the total allowance, while employees are required to cover 15% themselves. This type of arrangement is generally referred to as cost-sharing or coinsurance.
How much money is in a GCHRA allowance?
The nice thing about the GCHRA benefit is that there isn’t a minimum or maximum limit on how much your monthly allowance can be. That means your allowance will simply be however much your employer decides to offer.
Employers can also decide to give out different allowance amounts to different classes of employees. For example, a part-time employee may only get $100 a month, while full-time employees get $500 a month.
Can I use a GCHRA to pay for my group health insurance premium?
Unfortunately, the GCHRA will not allow employees to be reimbursed for group premiums, because there’s no way to prevent “double-dipping.”
Double-dipping is where you get a tax break twice on the same premium payment—which isn’t allowed under IRS rules. With job-based health insurance, the vast majority of premium payments are made by employees as a pre-tax payroll deduction.
So if you use your GCHRA allowance (which is also tax-free) to pay your premium, you’ve created a double-dipping issue where you’re using tax-free dollars to pay for a pre-tax deduction.
The IRS won’t let that kind of thing slide, so you’ll need to pay for your group health insurance premium with your own money, not your GCHRA allowance.
What if my employer offers an individual coverage HRA and a group health plan?
In addition to the GCHRA, there’s another type of HRA, the individual coverage HRA (ICHRA) that employers can offer to help their employees get their medical expenses reimbursed.
However, unlike the GCHRA, employees can’t use the ICHRA and the group health plan together. If an employer offers both a group health insurance plan and the ICHRA, each benefit would be offered to different types of employees.
For example, an employer can offer group health insurance to full-time employees and the ICHRA to part-time employees. Or, seasonal employees may get the ICHRA while salaried employees get group health insurance.
However it’s divided up, the employee will never have a direct choice between whether they get the group health insurance plan or the ICHRA—they’ll just get whatever benefit is offered to their employee class, as set up by their employer.
Taking advantage of both your employer’s group health insurance plan and the GCHRA benefit is a smart way to get the most out of your employer-sponsored plans while paying the least amount out of pocket for your health coverage. With a GCHRA, your employer gets a flexible and low-cost benefits option while you get the essential coverage you deserve.