The Group Coverage Hra
As its name suggests, the group coverage HRA is available to businesses who also offer a group health insurance policy. With the group coverage HRA, businesses can offer monthly allowances to cover items not eligible under the group policy, such as the deductible. Businesses of all sizes can offer the group coverage HRA, there are no allowance caps, and businesses can offer different allowance amounts to different employees.
Using An Hra Plan In Conjunction With A Standard Health Insurance Policy
In theory, it should be easy to use an HRA plan with a standard health insurance plan. Simply use your regular health insurance like you normally would, and pay for anything out of pocket that this health insurance plan does not cover. After youve paid for medical expenses out-of-pocket you can submit to your HRA administrator for reimbursement.
As long as theyre allowed under the terms of the HRA plan, you should be reimbursed promptly. However, if these expenses are not allowed under the terms of the HRA plan, you may not be reimbursed. Make sure to be knowledgeable about the limitations of your HRA Plan before you get any medical care.
Qualified Small Employer Hra
A QSEHRA is available to employers with fewer than 50 employees that do not offer a group health insurance policy. With a QSEHRA, you can offer allowances up to $5,250 for single employees and $10,600 for employees with a family in 2020. All employees must receive the same allowance amount, except in cases regarding an employees family status.
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Final Thoughts On Hra Health Insurance Policies
In conclusion, HRA plans are predominately a good thing for employees because they cover out-of-pocket expenses that are not covered under a standard health insurance plan.
However, an employer may attempt to save money by switching their employees to a less comprehensive plan but adding an HRA account. In this case, whether the situation is better or not depends on the new plan and on the HRA account.
As previously mentioned, some employers will simply add an HRA plan as an added benefit for employees, especially if the employee moves up in the organization.
Whether youre an employer who needs to insure an entire company or just one person looking for individual coverage, weve got your back. Enter your zip code in the box below to get free health insurance quotes based on your own unique needs and budget!
Limitations Of Health Reimbursement Arrangements
An HRA only covers qualified medical and dental expenses. According to the Internal Revenue Service , medical expenses are costs incurred to alleviate or prevent a physical or mental ailment, not expenses to maintain general health, such as vitamins.
Expenses that do not qualify as a necessary medical expense include, for example, teeth whitening, maternity clothes, funeral services, health club membership fees, controlled substances, childcare for a healthy baby, marriage counseling, medication from other countries, and non-prescription medications.
An employer may exclude certain medical expenses even though the expenses are qualified by the IRS. An employers list of reimbursable medical expenses will be outlined in its HRA plan document for employees.
The IRS issued a statement notifying taxpayers that at-home COVID-19 tests and personal protective equipment such as face masks and hand-sanitizer are both considered eligible medical expenses that can be paid or reimbursed under health flexible spending arrangements, health savings accounts, and health reimbursement arrangements .
Can be used to pay for medical and dental expenses such as prescription medications, an annual physical exam, and birth control pills
Can be used to pay for individual health insurance with pretax dollars
Reimburses employees after they’ve paid for certain medical expenses and insurance premiums
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What Hra Plans Cover
In general, HRA plans cover all of the medical expenses that your standard healthcare plan does not cover. Those expenses can be out-of-pocket expenses, co-pays and any other sort of medical bills that your standard healthcare plan does not cover. Of course, which expenses your health care plan doesnt cover will vary.
Many employers that package a healthcare plan with an HRA will choose a healthcare plan that will result in many out-of-pocket expenses for their employees. This is not necessarily a big problem if the employer also makes generous contributions to the employees HRA account.
What Is The Difference Between A Qsehra Group Coverage Hra And Retiree Hra
There are different types of health reimbursement arrangements that employers might offer to their employees:
- A Qualified Small Employer HRA is a type of HRA available to small businesses that dont offer traditional health insurance. Employees may use these reimbursements to cover the cost of premiums for health insurance they buy elsewhere.
- A group coverage HRA is a plan that employers pair with a high-deductible health plan to help employees supplement the higher deductible costs.
- A retiree HRA is one that employers can offer to help their retired former employees pay for out-of-pocket healthcare costs during retirement.
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The Tax Advantages For Employers Offering Hra Plans
The tax advantages for employers offering HRA plans differ based on how these plans are structured, how big of a company it is, and the contributions of the employers make to the plans. The most important of these factors is the contributions made to the plan. There are significant tax credits based on the amount of these contributions.
In fact, this is one of the main reasons that employers offer HRA plans. Using these tax credits to their fullest extent can be complicated, but this is not something that you need to worry about as a policyholder.
What Is The Difference Between A Health Savings Account And An Hra
Under a health reimbursement arrangement , an employer may choose to reimburse employees for some of their out-of-pocket healthcare costs. Only the employer may contribute funds to the HRA, and employees cannot enroll in an outside HRA.
A health savings account is a type of savings mechanism where employees with a high-deductible health plan through their employers may set aside money in a tax-advantaged account to pay for medical expenses. Only employees with an HDHP can enroll in an HSA, but they dont have to get the plan through their employers They can also enroll in an outside plan. Unlike an HRA, both the employer and employee may contribute to an employees HSA.
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Eligibility Requirements For The Health Care Reimbursement Arrangement
To be eligible to receive the HRA, you must be:
- Currently eligible for OPERS health care coverage as a primary benefit recipient
- Enrolled in both Medicare Parts A and B
- Enrolled in an individual Medicare medical plan through the OPERS Medicare Connector
The HRA administrator sets up the account after the retiree is enrolled in a medical plan through the Connector.
Disadvantages Of Using A Health Reimbursement Arrangement
Blog by: Michael Sheeran, CFP
A Health Reimbursement Arrangement , can be one of the most effective ways to save money on your group health insurance premiums. In fact, some companies can save upwards of 30% over traditional plan setups. Despite the potential savings, there can be some drawbacks of a HRA and things to be aware of before making the jump.
As a reminder, a HRA is a strategy that employers can use to reimburse employees, tax-free, for medical services. The usual setup is to purchase a high deductible health plan and then reimburse employees for medical services as they are incurred.
To illustrate how this would work, imagine a company with ten employees and an annual premium of $100,000 on a platinum plan. In setting up the HRA strategy, they purchase a lower-cost Bronze plan for $60,000 annual premium reducing the premium by $40,000. Each employee has an upfront deductible of $2,500 on the new plan and the employer has agreed to reimburse each employee the whole deductible if they have any claims. They will use a third-party administrator to set everything up and employees will work with the TPA to submit their claims and get reimbursed. At this point, the employer has saved $40,000 in premium and has agreed to fund up to $25,000 in healthcare expenses for their employees. Their worst-case scenario is saving at least 15% over their current platinum plan.
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General Rules For Health Reimbursement Arrangements
Employer contributions only
One reason HRA plans allow such flexibility in spite of tightening group health plan regulations is that it is funded entirely by the employer. No employee contributions are allowed in an HRA, which eliminates IRS concerns over a refund of pre-taxed employee contributions.
This also lets employers keep control of funds and to decide what expenses are reimbursed through the plan, a key point of flexibility popular in HRA plans.
Important: When integrated with a group health plan, employees may pay their portion of the premiums with pre-tax salary deductions however, no portion of the HRA may receive employee dollars.
Group health plan options
Health Reimbursement Arrangements work with a variety of group health plan options, depending on the HRA plan design. The employer may choose traditional group health insurance for employees or a high-deductible health plan.
Employers choosing the ICHRA, QSEHRA, or Section 105 one-person HRA plan designs do not sponsor a group health plan at all, but reimburse the employee for individual health coverage premium instead.
Tax-exempt for employees
Reimbursements through an HRA are tax-deductible for the employer and tax-exempt for employees. This means that everyone enjoys a tax advantage when an employer chooses an HRA.
HRA Plan Document Required
The Code requires that the HRA plan be in writing and that every participant receives a Summary Plan Description, .
Prohibition on mid-year changes does not apply
Do Copays Count Towards My Out
Another perk of the ACA. According to the Obama administrations benchmark healthcare law, copays must count towards your annual out-of-pocket max. This rule is only for ACA-compliant plans, so if you are still uninsured and looking to get covered, contact a member of the HealthSherpa Consumer Advocate Team to learn about your options. Remember, all Marketplace plans available on HealthSherpa are ACA-compliant! You can contact the HealthSherpa Consumer Advocate Team at 855-772-2663.
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How Much Is Deposited Into My Hra
The monthly amount deposited into your HRA depends on your years of service and age when enrollment in the OPERS health care plan first takes place.
Individual allowance amounts range between $229 and $405 with more than 90 percent of current retirees receiving $337 or more per month.
You can check the amount in your HRA at anytime by logging into your Via Benefits Online account.
The Qualified Small Employer Hra
The QSEHRA is by far the most popular HRA currently available. Created in 2016, the QSEHRA is available exclusively to small businesses with fewer than 50 employees. With the QSEHRA, small businesses can offer different allowance amounts to employees based on family size. 2020 QSEHRA Allowance Amounts:
In 2020, employers can offer up to $5,250 per self-only employee and $10,600 per employee with a family. These amounts roll over month to month and can roll over year to year as well, but total QSEHRA reimbursements should not exceed the annual limits for the year. The QSEHRA is automatically available to all full-time W-2 employees, and businesses can choose to offer it to part-time employees as well . Businesses cannot offer a QSEHRA at the same time as a group policy.
How To Start An Individual Coverage Hra
You can set up an individual coverage HRA at any time. Youll need to provide a written notice to your new employees as soon as theyre eligible to participate and to current employees 90 days before the beginning of each plan year.
Employees will need information from this notice to fill out a Marketplace application and check eligibility for a premium tax credit on a Marketplace health plan, or free or low-cost coverage through Medicaid or the Children’s Health Insurance Program . They must be offered the chance to decline the individual coverage HRA annually before the plan year begins, or when theyre first offered the individual coverage HRA if that happens in the middle of the plan year.
Remember, to use their individual coverage HRA amount, employees must be enrolled in individual health insurance coverage, like a plan purchased through the Marketplace or from a private insurance company, or have Medicare coverage . Short-term plans, or other limited benefits coverage, like dental or vision insurance, dont meet this requirement . There must be reasonable procedures in place to confirm that employees and their households covered by the individual coverage HRA are enrolled in individual health insurance coverage.
Generally, employees will need to submit an application and select a plan in time for it to take effect by the first day that their individual coverage HRA can start.
An Hra May Not Automatically Cover Your Dependents
An HRA can be designed to cover just an employee or an employee and their dependents. Every HRA plan will have Plan Documents that define its specific HRA rules. If dependents are to be covered by an employees HRA, they must also be enrolled in a group health plan. From a practical perspective, it means dependents must be identified on claims and they, too, must be eligible.
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Establish A Deductible Amount
When creating a GCHRA, its up to the employer to decide the deductible that will be included for each class of employees. Common deductible amounts set by employers are between $150 and $500. When choosing the deductible amount, its important that employers remember that employees also have an insurance deductible to meet. Whatever amount is decided, employees will be required to pay that amount for GCHRA eligible health care themselves before any reimbursements are provided for further expenses.
Hras Can Cover Insurance Premiums Deductibles And More
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Health reimbursement arrangements are a benefit that some employers offer their employees to help with healthcare expenses. Theyre a way for companies to reimburse workers for these costs, and reimbursements are generally tax-free when used for qualified medical expenses.
Beginning in January 2020, the government allows employers to offer their employees two new types of HRAs. The first is called an individual coverage HRA, and companies can only offer it if they don’t offer group health insurance.
Employees can use these HRAs to buy their own comprehensive health insurance with pretax dollars either on or off the Health Insurance Marketplace. Individual coverage HRAs can also reimburse employees for qualified health expenses such as copayments and deductibles.
How much employers contribute to employees individual coverage HRAs is up to the employers, except that all workers in the same class of employees must receive the same contribution. Workers who are older or who have dependents may receive more.
Under the new rules, employers that continue to offer traditional group health insurance can also offer the second, new type: excepted benefit HRAs. These plans reimburse employees for up to $1,800 a year in qualified medical expenses.
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Can S Corporation Owners Participate
IRS regulations dictate that S Corporation owners and their dependents who own more than 2% of a business cannot participate in an ICHRA. This is because owners can write off their medical expenses through other means and are not considered employees of the business by the IRS. Fortunately, this rule only applies to owners and their dependents, ensuring that employees remain eligible for the benefit.
Learn more about which types of business owners can participate in an HRA:
First Year Claims Exposure
HRA plans will usually run calendar year regardless of what your underlying health insurance is. This is because most health plans have deductibles that reset every January 1.
-Health Plan renews every July 1 for your company you also decide to start the HRA July 1 this year
-HRA year 1, will run July 1 to Dec 31.
-HRA year 2, will run Jan 1 to Jan 31.
Why does this matter? If we go to my original example, you had pledged $2,500 per employee per year. This means you pledged that amount from July through the end of December and then it will refresh on January 1 with a new pot of money for everyone. This happens at the same time their deductibles reset. So for this first year, there is a potential for higher HRA usage than later because of the short year leading into January 1. You can work around this and update the plan documents if need be, but it is something to keep in mind.
***HRA Plans can be discontinued under a worst-case scenario
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Should I Use An Hra Administrator
Businesses offering an HRA should always use an HRA administrator. Without one, it’s easy to run into compliance trouble and HIPAA privacy violations.
HRA administration reporting features make real-time monitoring of HRA liabilities, reimbursements, and utilization easy. Employers can change plan benefits at any time or cancel the entire plan at any time, provided those offering QSEHRAs supply employees with the required notice.
In fact, HRA administrators like PeopleKeep allow small businesses to spend 10 minutes a month or less administering the benefit.
The Excepted Benefit Hra
Much like the group coverage HRA, an Excepted Benefit HRA is used to reimburse medical care expenses in addition to other excepted benefits. While the group coverage HRA is typically used to reimburse employees for out-of-pocket expenses, the excepted benefit HRA can also used to reimburse employees for excepted benefits.
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