Small Business? A Standalone HRA may be a Health Insurance Solution

Small Business? A Standalone HRA may be a Health Insurance Solution

If you’re a small business, it can be challenging – and expensive – to offer a traditional group health plan to employees. Since offering healthcare benefits can play an important role in attracting talent, two relatively new types of Health Reimbursement Arrangements (HRAs) may be the answer.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA): Effective starting in January 2017, employers with 50 or fewer full-time employees can use a QSEHRA to cover employee medical costs and individual insurance premiums.

With a QSEHRA, you set a monthly reimbursement allowance for employees’ expenses subject to IRS limits, which are $5,300 for self-only employees and $10,700 for an employee with a family in 2021. When an employee incurs out-of-pocket medical costs, they submit it for reimbursement.

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It’s important to note that a QSEHRA can’t be offered with a group health plan. Employees can have an individual insurance plan, coverage through a spouse, other coverage or no coverage and qualify for a QSEHRA.

Individual Coverage Health Reimbursement Arrangement (ICHRA): The ICHRA became available to employers starting in January 2020. Unlike the ICHRA, this type of HRA is available to employers of any size. And there’s no limit to the monthly allowance you set to reimburse eligible employees for qualified medical expenses and health insurance premiums. However, in order to qualify for reimbursements, employees must be enrolled in coverage purchased in the individual marketplace or Medicare for each month they are covered by the ICHRA.

Another condition is that an ICHRA must be offered on the same terms and conditions to all employees within a class, except that the HRA benefit amount may increase based on age. Several permitted classes are allowed, including full-timeYou are, however, allowed to

Also, even though you can offer both a group policy and QSEHRA, you can’t offer them both to the same employee class.

The right choice for your business between a QSEHRA and IHCHRA can depend on several factors. Yet with both potential options, you have a chance to enhance your benefits package.

Sam Slade is Managing Director, Employee Benefits, at The Hilb Group of New England, where he delivers consulting and brokerage services to local employers. He has extensive experience in all aspects of employee benefits, including underwriting, plan design, communications, compliance, and analytics, with a particular focus on alternative funding and self-insurance. Sam lives in South Kingstown with his wife and three sons.