What is an HRA plan and how do you find one that qualifies? That’s what we’ll walk through today. An HRA is a health reimbursement arrangement, a popular alternative to traditional group health plans. They are increasing in popularity as businesses of all sizes hear about the regulatory rule changes that make them more accessible, flexible and easy to use. HRAs give you the freedom to choose a plan that works best for you!
HRA: health reimbursement arrangements
There are several types of HRAs, but there are currently only two types that allow for employers to reimburse employees tax-free for qualified individual insurance premiums.
The two major types of HRAs that you might hear about are the ICHRA (individual coverage HRA), with no company size limitations or reimbursement limits, and the QSEHRA (qualified small employer HRA), which is designed for companies with less than 50 employees.
These are the only health reimbursement arrangements that allow employers to reimburse employees tax-free for health insurance premiums and qualified medical expenses. There are rules and regulations in place to ensure that employees are treated fairly, as well as stipulations for the types of health plans that are covered by an HRA.
Which HRA health plans can be used with QSEHRA?
Before an employee can participate in a QSEHRA, one must provide proof of Minimum Essential Coverage (MEC) as defined by the IRS in Section 106(g). MEC is a term that came from the Affordable Care Act.
- Major medical plans: Major Medical plans are those compliant with the Affordable Care Act (ACA) and qualify as Minimum Essential Coverage. If you purchased your plan through Healthcare.gov or your state’s public marketplace, your plan is a Major Medical plan, and your reimbursement through QSEHRA will be tax-free.
- Student insurance
- Your spouse’s plan (varies by QSEHRA plan): If you’re covered by your spouse’s group insurance plan there are some nuances to know regarding premium reimbursement. First, only the portion of the group premium that is not paid for by your spouse’s company is eligible for reimbursement. Second, most group plans are already paid on a pre-tax basis from your spouse’s paycheck. This is great! However, the IRS doesn’t want you to “double dip” and also get a pre-tax QSEHRA reimbursement, so your QSEHRA claim for your premium may be paid on a taxable basis (plan depending). If you can verify that your premium is paid post-tax by your spouse (very rare), then you can still be reimbursed tax-free through QSEHRA!
- Government plans: Medicare, Medicaid, CHIP (children’s health insurance programs), Tricare, and VA Care are all eligible healthcare plans and qualify as Minimum Essential Coverage. If you are on one of these plans and pay a monthly premium out of pocket, those can be reimbursed through QSEHRA tax-free.
- Dental Insurance & Vision Insurance Plans: Monthly premiums paid for individual and dental insurance plans can be reimbursed tax-free through QSEHRA. If you have dental and vision benefits through your spouse’s employer, only the portion of the group premium that is not paid for by your spouse’s company is eligible for reimbursement. In addition, if your spouse pays the premiums for your dental and insurance plans pre-tax, you can only be reimbursed for these premiums on a taxable basis.
- Limited Benefit Plans: Limited Benefit Plans are usually significantly cheaper than Major Medical plans but only provide a fixed amount of benefits (vs. unlimited benefits). These plans include short-term plans, fixed indemnity plans, accident plans, and any other plan that pays a medical benefit. As long as you also have a Minimum Essential Coverage health plan, and the limited benefit plan pays a medical benefit to the provider (not a cash benefit to you), the premiums on these plans can be reimbursed tax-free through QSEHRA.
This post goes into even more detail about the plans that do not meet MEC and/or are not compatible with QSEHRA.
Which HRA health plans can be used with ICHRA?
The most important thing for employees to do to use a company ICHRA plan is to sign up for a qualified health plan, which basically means it provides coverage of essential benefits such as preventative and wellness services and emergency services, as well as limits on cost-sharing.
The following plans can be integrated with ICHRA.
Need help finding an HRA plan?
If you’re an employee looking for a qualified ICHRA plan, you can shop and compare plans directly at Take Command. For the QSEHRA, check out our comprehensive QSEHRA guide. We wrote this guide about what can be reimbursed, ensuring that you get the most benefits out of the QSEHRA. Employers interested in structuring coverage or comparing options can talk with an expert and get started with a custom design in minutes.