If you're a small business owner who is considering small business health insurance, a small business HRA might be just what you are looking for. A small business HRA is a tax-advantaged tool that allows businesses with less than 50 full-time employees to reimburse their team for individual health insurance. Also known as a Qualified Small Employer HRA (QSEHRA for short), the small business HRA is changing the way small businesses think about benefits.
The best HRA for small businesses
There's an HRA designed specifically to help small businesses. It's even called a small business HRA depending on who you ask. Essentially, it's a tax-advantaged, affordable small business health insurance option for you.
The Qualified Small Employer HRA (QSEHRA) was created when the bipartisan 21st Century Cures Act was signed into law by President Obama. It's a new type of health reimbursement arrangement specifically designed to help small businesses afford competitive benefits packages for employee recruitment and retention.
QSEHRAs are sometimes referred to as defined contribution health insurance or 401(K)-style benefits. Defined contribution means the business owner sets an amount each month to reimburse employees for their own individual policies. Many small businesses have been doing this, but in the past you'd have to pay payroll taxes and employees would have to pay income taxes.
In contrast to small group plans, which are expensive, one-size-fits-all and unpredictable, QSEHRAs allow the business owner to control the monthly costs while still offering a great benefit.
How does the QSEHRA work?
- Employer decides how much money to contribute each month and what they will reimburse.
- Employer provides employees with standard information about how the QSEHRA works.
- Employees choose an individual health plan that meets MEC requirements.
- Employer outsources certain administrative functions like verifying coverage (this is where Take Command Health comes in!).
- Employee pays insurance premiums, visits their doctor, picks up a prescription (or all of these), then submits the receipt to their employer.
- Employer reimburses the employee for their qualified health expenses. This can automatically be reimbursed through payroll!
How to set up an HRA for small business
It’s not advisable to administer your own QSEHRA because of HIPAA, so you’ll want to go through a third-party administrator (like Take Command!). You can sign up any time, and a new HRA offering qualifies employees for a special enrollment period so they can sign up for their individual plan without waiting for open enrollment.
Setting one up is pretty straight-forward. Here’s what you need to do:
- Design your reimbursement plan
- Create your legal plan documents
- Set a start date and cancel any group health policies (if applicable)
- Provide required notices to your employees
Our comprehensive QSEHRA guide goes into detail on each of these steps.
84% of our clients spend less than an hour each month administering their HRA.
Take Command can help with your QSEHRA
If you are searching for a hassle-free way to offer affordable benefits, a small business HRA is certainly worth considering. Use our QSEHRA tax savings calculator to see how much you could save, or take a spin with our QSEHRA plan designer tool to see what your monthly costs would look like.
If you're ready to get started, setting up a small business HRA is a breeze! Our team is here to help clear up any confusion surrounding small business health insurance options. Our guide will provide information to help employers make the best decision possible regarding health insurance for their company.
Don't hesitate to give us a shout via our chat feature on the website. We would be happy to help.
A wife to one and mother to four, Keely does all of the things. She’s also dabbled in personal finance blogging and social media management, contributed to MetroFamily magazine, and is passionate about good food, treasure hunting and upcycling. With a B.S. in Psychology from the University of Oklahoma and a knack for a witty punchline, it’s no surprise that Keely’s social posts are as clever as they get. In her (very little) free time, you’ll find Keely with her nose in a book or trying out a local restaurant with her family.