When it comes to HRA individual health insurance, it’s important to know which plans are compliant and which don’t quite make the cut. An HRA, or health reimbursement arrangement, allows small business owners to reimburse their employees tax-free for health care costs, including individual health insurance premiums. Let’s look at the two main HRAs you should know about, and how to find compliant plans for both.
How HRA individual health insurance works
On the face of it, health reimbursement arrangements (HRAs), are fairly simple — an employer picks an HRA option and sets a budget. When an employee pays for a premium or has a medical bill for a procedure, prescription, or even a co-pay, the employer reimburses them. There are two main types of HRAs that we'll be talking about.
- The Qualified Small Employer HRA allows businesses with fewer than 50 full time employees to reimburse their employees tax-free.
- The Individual Coverage HRA allows companies of any size to reimburse employees for health insurance with no contribution limits.
ICHRA plan requirements
A Qualified Health Plan for ICHRA is a major medical plan that can be purchased on or off the Exchange. It must meet the minimum requirements as outlined in Public Health Services (PHS) Act Section 2711 and Section 2713. These two provisions require no annual or lifetime limits on the dollar amount for coverage of essential health benefits and full coverage of preventative health services to be covered with no shared cost to the insured.
Essentially, ICHRA requires individuals to purchase a qualified medical plan that is MEC compliant.
ICHRA plan options
The following plans are allowed with ICHRA:
- Individual Major Medical Plans
- Catastrophic Plans (limited to under age 30
or qualify for a hardship exemption) - Medicare Part A + B or Part C
- Student Health Insurance
On the other hand, the following plans do not work with ICHRA:
- Short-Term Limited Duration Insurance (STLDI) - While short term plans can not be integrated with ICHRA, they do work with EBHRA.
- Health Care Sharing Ministries (HCSM)
- Fixed Indemnity Plans
- Excepted benefits coverage only (vision, dental, etc)
- Association Health Plans
- Multiple Employer Welfare Arrangements (MEWA)
- TRICARE
- Spouse’s insurance - Individual coverage integration unfortunately does not include coverage on a spouse's plan. This post on ICHRA and spouse's insurance has more information and options.
QSEHRA plan requirements
Before an employee can participate in a QSEHRA, one must provide proof of Minimum Essential Coverage (MEC). MEC is a term that came from the Affordable Care Act. Prior to 2019, individuals were required to purchase a health plan that met MEC standards or pay a tax penalty. While the tax penalty has been lifted nationally (some states still have a state penalty), the law has not gone away and individuals are still required to enroll in qualified health plans.
There are several requirements for a plan to be considered MEC including coverage of the 10 essential health benefits (such as preventative and wellness services, immunizations, mental health, etc.) and limits on cost sharing (copays, deductibles, and out of pocket maximum).
Check out our handy guide on where to buy MEC for QSEHRA!
QSEHRA plan options
The following types of plans work with QSEHRA:
- Major medical plans
- Student insurance
- Your spouse’s plan (varies by QSEHRA plan)
- Government plans: Medicare, Medicaid, CHIP (children's health insurance programs), Tricare, and VA Care
- Dental Insurance & Vision Insurance Plans
- Limited Benefit Plans
While these types of plans do not work with QSEHRA:
If you would like to use an alternative plan like a sharing ministry, short-term plan, or indemnity plan, you should know that these types of plans will not meet the MEC requirement on their own.
- Cash Benefit Plans
- Other Types of Insurance Plans: Additional insurance policies that do not pay a medical benefit and therefore cannot be reimbursed through QSEHRA include: Life insurance policies, policies providing payment for loss of earnings, policies for loss of life, limb, sight, etc. and auto insurance.
- Health Sharing Plans
Pro-tip: MEC plans (or as we call them, Skinny MEC plans) can also be a nice complement to sharing ministries, short-term, and other alternative plans by covering preventive services not typically covered by alternative plans. Find more info about QSEHRA plans here!
We can help with your HRA individual health insurance needs!
Setting up an HRA is a snap and monthly administration is quick and painless, especially when you use a third party HRA administrator like Take Command. We take care of compliance, reporting, onboarding employees and documents needed for tax time. Our reimbursement platform will walk you through every step!
Our comprehensive guides to the ICHRA and QSEHRA might answer many questions you have, but our team of HRA experts are happy to help. Don't hesitate to reach out!
