With open enrollment on the horizon, now is the time to understand the HRA tools changing the employer sponsored benefit market. The Qualified Small Employer HRA (QSEHRA) is completing its third year of existence, and the Individual Coverage HRA (ICHRA) is new for 2020 (enrollment begins October 2019). Below are the pros and cons of QSEHRA and ICHRA to serve as a guide for choosing the best solution.
- Any business of any size can participate. ICHRA is an HRA solution for small business AND mid-size to large companies.
- Employers can vary monthly reimbursement amounts to different classes of employees. These 11 employee classes separate employees into groups by job-based criteria such as hours worked, geographic location, salary v. hourly, age and filing class. This is particularly helpful for companies wanting to offer a reimbursement to all employees but want to make a distinction between salaried management and hourly and/or part-time.
- ICHRA can be offered with a group plan, however, the business cannot offer both the group policy and the HRA to the same employee class. Note: offering ICHRA with a group plan triggers minimum class sizes.
- Reimbursement limits have been removed under ICHRA. No caps mean the employer can fully reimburse their employees' healthcare costs if they choose!
- The business determines the eligibility guidelines according to each employee class set ahead of time, but the HRA must be offered on the same terms to all employees in each class.
- Unlike QSEHRA, ICHRA can be used to reimburse medical expenses only as well as premiums only or both.
- The plans cannot be changed during the calendar year. It is suggested to set up employee classes when the ICHRA starts if the employer anticipates hiring that year.
- Employees participating in the ICHRA plan aren’t eligible for premium tax credits. They must choose one or the other.
- Employees on a spouse’s group plan are not eligible for ICHRA.
- There is a 90-day notification period for existing ICHRA. Note: this 90-day notice period is not for new ICHRAs.
- Employees with COBRA are not eligible to participate.
- ICHRA is subject to both COBRA and ERISA unless an exception applies (certain small employers, churches or governments not subject to Code Section 4980B).
- Changes to the plan can be made at any time throughout the calendar year.
- QSEHRA can be offered to an employee on a spouse’s group plan, however, their out of pocket medical expenses would be taxable.
- Employees continuing coverage via COBRA are eligible for QSEHRA if they are personally paying the premium.
- Employees with premium tax credits can also use QSEHRA, but the amounts offset (the do not stack).
- QSEHRA is not subject to COBRA and ERISA.
- Beginning in January 2020, offering a QSEHRA prompts a Special Enrollment Period.
- Only companies with fewer than 50 full-time employees may participate.
- QSEHRA cannot be offered with a group plan.
- There are reimbursement limits set by the IRS. Annual allowance limits are $5,050 for employees with individual insurance plans ($429/mo) and $10,250 for employees with married and family insurance plans ($870/mo).
- Premiums only and premiums + medical expenses are the only two options for reimbursement. Medical expenses only is not an option.
Do you need to speak to someone to determine which HRA is best for your business or client? We are here to help! Schedule a call with someone on our team of HRA experts for personalized guidance. Open enrollment will be here in a few short weeks, so now is the time to get your ducks in a row!