An HRA medical plan is a popular alternative to traditional group plans. Think of an HRA (or health reimbursement arrangement) as a 401(K) style benefit that puts the power in the hands of employees, thus shifting the risk from the employer and offering more personalization and choice for workers.
A health reimbursement arrangement is a tax-advantaged tool built on a series of regulations that help to ensure they are being offered fairly and are achieving their intended aim, which is to help employees pay for benefits tax-free.
The two major types of HRAs that you might hear about are relatively new to the market. They are ICHRA (individual coverage HRA), with no company size limitations or reimbursement limits, and QSEHRA (qualified small employer HRA), which is designed for companies with less than 50 employees.
How do HRA medical plans work?
- Employers design their plan and set reimbursement allowances
- Employees sign up for the health insurance plan of their choice and pay their medical bills
- Employees provide proof of their expenses
- Employers reimburse the employee
Which medical plans work with my HRA?
QSEHRA compatible medical plans must meet Minimum Essential Coverage requirements. These include:
- Major medical plans
- Student insurance
- A spouse’s plan
- Government plans: Medicare, Medicaid, CHIP (children's health insurance programs), Tricare, and VA Care
- Dental and vision insurance plans
- Limited benefit plans
- Sharing ministries
ICHRA compatible medical plans must be a qualified health plan. These include:
- Major medical plans purchased on the exchange (Bronze, Silver, and Gold)
- Medicare (Part A+B, or Part C)
- Catastrophic Plans (limited to those under age 30 or must qualify for hardship exemption)
- Student Health Insurance
How HRA medical plans compare to group insurance
Small-group insurance remains difficult to understand both for employers and employees alike. Costs fluctuate from year to year and plans offer little flexibility. There are a few options for group coverage in addition to HRA options that we cover in our Small Business Health Insurance Guide, which you might find helpful.
In contrast, an HRA medical plan takes the burden of managing a health plan and underlying health risks off of the employer. You or your clients won’t have to hassle with renewals, worry about participation rates, stress about what doctor networks your employees want, or be surprised by annual premium increases. Instead, employers can decide which employees qualify, set their monthly allowances, and get back to managing their business while employees get to choose the plans they want.
Need help getting started?
Take Command Health is a recognized leader in QSEHRA administration, ICHRA administration, and small business HRA tax strategy. Is your company or client going to be a part of this exciting employer-based benefits revolution?