What kind of HRA will work with self-employed health insurance?
- As a self-employed individual, you may be able use a Health Reimbursement Arrangement (HRA) to pay for your healthcare expenses. There are different types of HRAs that may work with-employed health insurance.
- Individual Coverage HRA (ICHRA): This new type of HRA, which became available in 2020, allows employers, including self-employed individuals, to reimburse employees for individual health insurance premiums and/or qualified medical expenses tax-free. This can be a good option if you want to offer health benefits to yourself as a self-employed individual.
- Integrated HRA: This type of HRA is designed to work with a group health plan and is not typically available for self-employed individuals who do not have a group health plan. However, it may be possible to use an integrated HRA if you have a spouse who is employed and has a group health plan.
- One-person 105 HRA: The Self-Insured Medical Reimbursement Plan states that Section 105 HRAs must be integrated with a group health insurance plan, but it doesn’t specify the size of that group. So small business owners with no employees, solopreneurs, party of one – this works for you! There’s no clause states that you, as a self-employed individual, can’t participate in an individual health care plan and integrate it with an HRA. As long as no additional employees are being discriminated against through their exclusion from the HRA, you’re good to go. For a more in-depth discussion of One-person 105 HRAs, check out this article.
- Qualified Small Employer HRA (QSEHRA): As we mentioned earlier, a QSEHRA is an HRA plan reserved for businesses with 50 or fewer employees. Depending on how you structure your business, a QSEHRA is a viable option for your health benefits as a business owner with no employees because, well, 1 is less than 50 so you qualify for QSEHRA! If you’re the owner and considered an employee rather than employer, you can participate in your HRA small business health insurance.
Take a look at this article to ensure you satisfy the legal requirements set in place by the IRS regarding QSEHRAs.
Still not sure? Our expert team is standing by and would love to talk you through your options.
Important note about HRAs: Not all self-employed individuals will be eligible for an HRA. To be eligible, you must have a self-employed business that generates income and you must not be eligible for coverage through a spouse's employer or another group health plan.
You should consult with a licensed insurance agent or financial advisor to determine which type of HRA is best for your specific situation.
Health insurance for small business with one employee
Small businesses with one employee can enroll in group health insurance through the Small Business Health Options Program (SHOP). SHOP is a government-sponsored program that makes small business health insurance plans available to businesses with fewer than 50 employees. The SHOP group health insurance program is designed to be simple and flexible, allowing employers to choose from a range of plans and customize coverage to fit their needs. Business owners can offer their employees one plan or a selection of plans to choose from.
Your small business may also qualify for an HRA. Contact the Take Command team to see which HRA is the best fit for your business. Schedule a call today!
Health insurance for employees small business
Like we described above, SHOP health insurance is a common choice for small business owners. Here are some other options to consider when choosing a business health insurance plan. Options for best health insurance for small business include:
- Group Health Insurance: Small businesses can purchase group health insurance for their employees, which is often offered through insurance brokers or directly from insurance companies.
- Health Savings Accounts (HSAs): HSAs allow employees to set aside money tax-free for medical expenses. Employers can contribute to their employees’ HSAs, which can reduce their own taxable income.
- Health Reimbursement Arrangements (HRAs): HRAs are employer-funded accounts that can be used to reimburse employees for out-of-pocket medical expenses.
At Take Command, we (obviously) think HRAs are the best option for small business employer health insurance. Employees get to pick the individual health insurance plan that works best for them and get reimbursed for premiums and qualified medical expenses through the employer. Win-win!
And it’s also tax advantaged. So win-win….win?
We think so!
Affordable health insurance for small business owners
Finding affordable health insurance for small business owners isn’t easy. In fact, due to small business health insurance costs, many employers opt out all together. If your business has fewer than 50 employees, you aren’t required to offer health coverage (though it is a nice perk if you want to attract and keep good people).
With an HRA, small business owners can reduce small business health insurance costs by empowering employees to shop health insurance plans on the marketplace. The employee pays for their individual health insurance plan and the employer reimburses them (tax free!) for the costs of qualified medical expenses. It’s a smart way to avoid ever increasing small business health insurance costs and put the power back into the hands of your team. And it’s one of the best ways to get affordable health insurance for small business owners.
Health reimbursement arrangements for small business
An HRA is an employer-funded health benefit used to reimburse employees for qualified medical expenses that may even include health insurance premiums. HRAs provide a tax benefit to the employer and employee. HRAs are not health insurance, and we mean this in a good way. HRAs provide your small business with all the benefits you love from traditional small business group plans without all drawbacks. HRAs are an excellent way for small businesses to offer employees personalized and flexible health benefits to pay for specific healthcare services that meet their individual needs. They're an incredibly cost-effective option for employers that can't afford small business health insurance plans.
Two popular HRAs for small business owners
- Qualified Small Employer HRA (QSEHRA) A company-funded health benefit that reimburses employees for qualified medical expenses.
- Individual Coverage HRA (ICHRA): Businesses of all sizes can use ICHRA — including non-profits and churches — to reimburse employees tax-free for the cost of their health insurance premiums and other healthcare expenses.
Best options for HRAs employer health insurance
Employers can use HRAs to reimburse employees for the cost of their own individually purchased health insurance. HRAs are also commonly used to cover coinsurance payments, prescription medications, and other qualified medical expenses.
There are two types of HRAs that would be great small business health insurance (rather, reimbursement). These include QSEHRA and ICHRA are the premier health benefits plans Take Command offers.
ICHRA: the individual coverage HRA reimburses employees for insurance rather than buying it for them. It also brings a design feature that allows owners to scale benefits by class.
It offers the most flexibility and is a top choice for businesses with a mixed workforce. There are 11 ICHRA employee classes (categories of employees), and the employer can choose how much to reimburse each class. For example, full-time vs. part-time employees, seasonal employees, and salaried vs. non-salaried employees can each have a different reimbursement arrangement.
- ICHRA works for companies of any size, from start-ups to large companies.
- There are no reimbursement limits.
- You can combine ICHRA with a group plan.
QSEHRA: the qualified small employer HRA (sometimes called a small business HRA) allows small employers to set aside a fixed amount of money each month that employees can use to purchase individual health insurance or use on medical expenses, tax-free.
- Perfect fit for small businesses because it works for those with fewer than 50 employees.
- There are QSEHRA contribution limits. For 2023, businesses with less than 50 employees can contribute a maximum of $5,850 for individual employees (this adds up to $487.50 per month) and a contribution of $11,800 for employees with a family (this adds up to $983.33 per month).
- It can’t be combined with a group plan.
Unlike ICHRA, QSEHRA reimbursements must be the same for everyone, but you can vary by age and family size.
With an HRA, you can remove the headache of traditional business-offered health insurance plans and put the power back into the hands of your team by providing reimbursements for qualified health care expenses.
If you want to dive deeper into ICHRA and QSEHRA, we have comprehensive guides (here and here), and FAQ pages (here and here).
Group health insurance for small business
While traditional group health insurance is the most understood health benefit for employees, it’s not the only one, and it’s not always the best health insurance for small businesses.
Group plans for small business health insurance have many drawbacks. They are expensive, one-size-fits-all, require minimum participation rates, and are financially unpredictable. However, monthly premium amounts can be out of reach for small employers with limited budgets. Additionally, minimum participation requirements leave most small organizations with only one or two policies. As a result, many employees may not get the policy they want, or their healthcare needs may need to be covered.
All of these reasons are why business owners are letting their employees chose their health insurance coverage option and reimbursing them with an HRA.