You’ve likely heard a thing or two about HRAs, the 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! So, what is an HRA plan? Let’s take a look at the main types of HRAs and the plans that work with them.
What is an HRA?
HRA stands for health reimbursement arrangement. It is a tax-advantaged tool built on a series of regulations that help to ensure they are being offered fairly and are achieving their intended aim, which is to help employees pay for benefits tax-free.
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.
HRAs beat group plans when it comes to flexibility, portability, and cost!
What is an HRA plan?
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.
- 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.
- 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.
- 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.
- Sharing ministries: Faith-based sharing arrangements are permitted as long as you have a MEC plan to accompany it.
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.
- Major medical plans purchased on the exchange (Bronze, Silver, and Gold)
- Medicare (Part A+B, or Part C)
- Catastrophic Plans (limited to those under age 30 or must qualify for hardship exemption)
- Student Health Insurance
Note: sharing ministries, spouse’s plan, and TRICARE do not integrate with ICHRA.
Still have questions about HRA plans?
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. And you can always chat with one of our HRA experts here on the Take Command website.