Navigating the complexities of employee benefits, Progressive Benefit Solutions (PBS) stands at the forefront of offering innovative health solutions through Health Reimbursement Arrangements (HRA). We’re proud to help employers offer this valuable employee benefit and are excited to announce our carrier partnerships:
- Anthem of CT
- Harvard Pilgrim
- Aetna (over 100 employees)
- United Health Care (over 100 employees)
At PBS, we provide services that require us to participate in the request for proposal (RFP) process of carrier companies. We work closely with these carriers and are regularly involved in their selection process. By partnering with us, companies can enhance their employee benefits package, promoting a healthier workforce.
What is a Health Reimbursement Arrangement?
An HRA, or health reimbursement arrangement, is an excellent way for employers to help cover their employees’ medical costs. This employer-funded account can reimburse employees for qualifying medical expenses, including insurance premiums, and both employer and employee get to enjoy tax benefits.
An HRA is solely funded by the employer, allowing employees to submit reimbursements for qualifying medical expenses, including out-of-pocket expenses not covered by traditional insurance plans. Reimbursements, funded by employer contributions, extend to employees and their dependents, covering a broad spectrum of qualifying expenses as determined by the IRS, which may also include insurance premiums depending on the arrangement’s specifics.
This arrangement isn’t health insurance, but rather a strategic approach for employers to make medical care more affordable for their employees by directly addressing out-of-pocket expenses. Employers might offer individual HRAs for their employees, while small businesses that meet the qualifications might opt for a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), leveraging employer contributions to enhance healthcare accessibility and affordability for their workforce.
Different Types of HRAs
Various types of health reimbursement accounts are available depending on the specific needs of an employer and their employee. Some of the primary types of HRAs include:
- ICHRA: Employers of any size can offer an Individual Coverage HRA to reimburse their employees for all qualifying expenses, including individual health insurance premiums, which can be integrated with the premium tax credit to optimize healthcare spending.
- QSEHRA: A Qualified Small Employer HRA only reimburses employees for insurance premiums, possibly including those for medical insurance, prescription drug plans, dental insurance, long-term care, etc. Only employers with fewer than 50 employees can offer this plan if they don’t provide group health insurance.
- Bridge HRA: Expenses are only reimbursed once you’ve met the annual minimum for your HSA and the annual deductible for your HDHP.
- Donut Hole HRA: Employees are primarily responsible for the first portion of expenses, employers primarily for the second portion, and employers for the third portion.
- Benefit HRAs: A new concept introduced to offer a more flexible solution for employers to cover a wider range of healthcare-related benefits beyond traditional medical expenses.
New HRA Types as a Result of COVID-19
New types of health reimbursement accounts (HRAs) have been created in response to the Covid-19 pandemic. Employers can now offer these accounts to reimburse expenses related to healthcare. This includes costs such as:
- Medical Expenses: Qualifying medical bills.
- Work from Home: Internet, computer, furniture, office supplies, etc.
- Lifestyle Wellness: Home gym, exercise footwear, nutrition classes, etc.
- Emergency Fund: Utilities, groceries, rent, etc., during hardships.
- Child Care: Child care services, online courses, etc.
- Transit: Parking, gas, employer-approved vehicle maintenance, public transit, etc.
HRA Advantages and Benefits
Health reimbursement arrangements are a win-win solution for both employers and employees. The main advantage is that HRAs make healthcare more affordable, which is crucial in today’s world. Another significant benefit is that employees have great flexibility in choosing where they receive healthcare and what kind of healthcare they get.
Moreover, employers can enjoy tax benefits since the provided funds are tax-deductible. On the other hand, employees receive a tax benefit, as the reimbursements are not subject to income tax. Overall, HRAs are an excellent option for companies looking for a cost-effective way to provide healthcare benefits to their employees while still enjoying tax incentives.
How Do HRAs Compare to Other Medical Employee Benefits?
Compared to other health benefit options like health savings accounts (HSAs) and flexible spending accounts (FSAs), HRAs offer unique advantages, including the ability to reimburse employees for individual health insurance premiums and other qualified expenses.
Unlike HSAs, HRAs are not tied to high-deductible health plans, which not all employees can access. This flexibility means employees don’t need to accept high deductibles to enjoy the perks of an HRA, offering a significant benefit by directly addressing out-of-pocket medical costs.
HRAs differ from FSAs because they don’t come with a “use-it-or-lose-it” clause. This means unused HRA funds can often roll over from one year to the next. However, it’s important to note that HRAs have some limitations. They aren’t available to self-employed individuals, and employers have the power to exclude certain medical expenses, even if they’re technically allowed by the IRS.
Important Considerations for Implementing HRA
Employers should pay attention to several essential details when setting up an HRA. Compliance with all legal and regulatory requirements is crucial for any employee benefit, especially one as essential as healthcare. On top of that, HRAs should work seamlessly with existing health plans.
Once the HRA is established, human resources must clearly communicate how to maximize the benefit to employees. Workers must know which expenses qualify for reimbursement and how to submit claims. Effective communication ensures employees understand how to use this valuable resource.
How To Set Up and Manage HRA
Creating an HRA is a simple process, but it involves several steps. The first step is to verify eligibility. Once this is done, employers should decide how much to fund the HRA. Although different employees may receive different amounts, each employee within the same class should receive the same benefit.
Employers should then determine the start date and prepare all the necessary legal documents. The documents required vary depending on the type of HRA. Most employers partner with a third-party administrator to make managing the HRA hassle-free. At PBS, we simplify the management of HRAs with numerous carriers, from funding the account to processing reimbursements and other related tasks.
Common Misconceptions About HRAs
Employers should be well-prepared to explain to their employees what an HRA is and to be able to answer any questions they may have. It is essential to differentiate between HRAs and other types of health accounts, such as HSAs and FSAs, with which employees may be more familiar. Employers should also clarify which expenses qualify under an HRA and the fact that funds are not taxed. It is important to note that employers cannot access specific details of an employee’s medical care as claims are submitted to the TPA.
Ready To Set Up HRA for Your Employees?
HRAs provide a flexible and tax-efficient way for employers to offer health benefits to their employees. By selecting the right HRA plan, your business can provide your employees with valuable assistance in managing their medical expenses.
Interested in getting started with an HRA? Or need advice on HRA implementation?
Contact us today! Our team is here to guide you through every step of the process.