What options are available for employer health care reimbursement for premiums and medical expenses? If you’re a small business owner, you’ve probably asked this question. We’ve got the information you need about health reimbursement arrangements, which make it easy for employers to customize benefits for their employees. There are two main types of HRAs that make it possible to reimburse employees for qualified medical expenses in addition to health insurance premiums. Let’s look at those!
The QSEHRA (qualified small employer HRA) and the ICHRA (individual coverage HRA) are the only health reimbursement arrangements that allow employers to reimburse employees tax-free for health insurance premiums and qualified medical expenses.
The QSEHRA is designed for employers with less than 50 employees to reimburse for premiums and medical expenses if the plan allows. The ICHRA is for companies of any size. There are no limits to how much an employer can offer for reimbursement. This is a big difference with QSEHRA which has rather restrictive limits.
Employer health care reimbursement for health insurance premiums
With ICHRA, employers can offer as much or as little as they’d like as long as it’s offered fairly to each class.
Employers can also choose how to structure reimbursements to employees:
- Give all employees the same amount: For example, you could give all employees $200/mo.
- Vary reimbursements by family size: Since individual market plans cost more for families, employers can offer more for larger families. For example, an employer could offer $200 for single employees, $300 for married employees, and $600 for employees with families. Or they could offer $100 for each additional dependent.
- Vary reimbursements by employee age: Similarly, since individual plans typically cost more for older employees, employers can elect to offer higher reimbursement amounts to older employees.
- Vary by both family size and age: Combo of the above two options.
Employees must be covered by a Minimum Essential Coverage (MEC) health insurance plan in order to receive QSEHRA reimbursements. However, there are a few types of plans to be aware of that cannot be reimbursed through a QSEHRA, even with a Minimum Essential Coverage Plan. This post goes into more detail about which plans work and which plans don't work with QSEHRA.
Employers can limit reimbursements to only go towards eligible premium expenses. Typically, this refers to individual health insurance premiums but could also include eligible dental premiums, vision premiums, etc.
Employer reimbursement for medical expenses
Most employers choose to allow medical expenses to be reimbursed too. Eligible expenses include doctor visits, copays, dental cleanings, prescriptions, eye glasses, diabetes supplies, etc.
Note: Employers can choose to exclude categories of expenses (i.e., “prescriptions”) as long as the exclusion is applied fairly to everyone.
We make it easy for employees to just snap a picture of their receipts for reimbursement. Employers have a lot of flexibility over what is reimbursed. Understanding the impact of these options can go a long way towards helping the employer achieve their objectives and keep their budget in check.
Check out this pretty comprehensive list of the medical expenses that are reimbursable with an HRA.
How Take Command Health can help
If you still have questions about reimbursing health insurance premiums, we have a slew of resources available for you, and a group of experts standing by. Check out our comprehensive guides to ICHRA and QSEHRA. This guide walks you through what can be reimbursed with QSEHRA. Chances are, if you have a question about HRAs, we've got an answer for you!