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!
Can employers reimburse for health insurance premiums and medical expenses?
Good question! The answer is yes.
There are two ways to do that. Let's walk through it together.
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.
→ Learn how health insurance reimbursement works.
→ Learn more about how an HRA is funded.
→ Read more about Employer HRA Contributions.
Employer health care reimbursement for health insurance premiums
ICHRA basics:
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.
ICHRAs have seen triple digit growth since their inception, according to data from an HRA Council report.
QSEHRA basics:
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. There is an annual contribution maximum for QSEHRAs.
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.
→ Learn whether or not health insurance reimbursement is taxable!
Employer reimbursement for medical expenses
Most employers choose to allow medical expenses to be reimbursed too. Eligible expenses include:
- doctor visits
- copays
- dental cleanings and dental premium reimbursement
- 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.
With our user-friendly system, employees can effortlessly snap pictures of their receipts and get reimbursed quickly. Employers have the freedom to choose what expenses to reimburse, which can greatly assist them in accomplishing their goals while staying within budget. Understanding the full scope of these options is essential for employers looking to optimize their reimbursement strategies.
Check out this pretty comprehensive list of the medical expenses that are reimbursable with an HRA.
There are other tools that can help employees pay for medical expenses, like HSAs and FSAs, but HRAs are in a league of their own.
→ Compare HRAs vs HSAs vs FSAs in more detail.
How Take Command 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!
This post was originally published in 2021 and has been updated for 2023 to reflect all the exciting changes going on in the HRA world.
