Are you needing to learn all about the IRS health insurance reimbursement guidelines? We’ve got the information you need! The IRS has released rules and regulations surrounding the design and administration of HRAs (health reimbursement arrangements) which ensure that they’re being administered fairly without discrimination. Here are a few of the IRS HRA rule highlights.
How health insurance reimbursement works
An HRA is a tax-advantaged tool built on a series of regulations that helps to ensure it is being offered fairly and achieving its intended aim, which is to help employees pay for benefits tax-free.
An HRA works pretty much exactly how it sounds: the employer reimburses for premiums and medical expenses on a tax-free basis, and the employee chooses a plan that fits their needs. Employees are reimbursed when they submit a claim.
There are two major types of HRAs that business owners should know about. They are ICHRA (individual coverage HRA), a 401(K) style benefit solution with no company size limitations or reimbursement limits, and QSEHRA (qualified small employer HRA), which is designed for companies with less than 50 employees.
All about the IRS health insurance reimbursement guidelines
- The 11 ICHRA classes provide an added layer of flexibility. Now employers can scale benefit contributions differently based on hourly vs. salaried or even temporary employees from staffing agencies. Employers can utilize multiple plan types, but can only offer one plan to each employee class: For example, an employer could offer a traditional group plan to full-time employees and an ICHRA or QSEHRA to part-time employees but they can’t offer both to a single class.
- There will be a minimum class size for some categories: We understand the regulators’ desire to limit adverse selection, but wish these had remained a little more flexible. In general, employers with fewer than 100 employees must have at least 10 employees in a “class”. For employers between 100-200, classes must make up at least 10% of the total number of employees. Employers with over 200 employees must have at least 20 employees in a given class.
Special Enrollment Period:
- Employees that are newly eligible for a QSEHRA or ICHRA will be eligible for a Special Enrollment Period (SEP) and able to enroll in an individual plan on the marketplace.
Traditional Group Plans:
- “Traditional Group Plan” has been redefined to not include plans made up solely of “excepted benefits”: This fixes an issue with QSEHRA where employers offering a group dental or vision plan were disqualified from QSEHRA. With this fix, employers can offer ICHRA and a group dental plan without issue.
Qualified Health Plans:
For employees to participate in ICHRA and receive reimbursements, they must be covered by a qualified individual health plan. For a plan to be considered “qualified,” it must meet two primary requirements:
- Have no annual or lifetime limits (PHS 2711)
- Cover preventive health services with no cost sharing (PHS 2713)
- QSEHRA and ICHRA will not be subject to ERISA as long as certain safe harbors are met: This is important to keep these plans simple and free of more burdensome regulations.
Want to read the IRS health insurance reimbursement guidelines for yourself?
If you think an HRA might work for your business, don’t hesitate to reach out to our HRA experts. We are around to chat on our website and would be happy to help you.