If you are a small business owner offering group health insurance, it is guaranteed that you have felt the pinch from rising insurance costs over the last few years. It can be difficult to walk the line on offering competitive benefits to attract employees while at the same time limiting the exposure from increased insurance premiums. If this feels familiar to you, perhaps you should consider the benefits of a health reimbursement arrangement or HRA.
So, what is an HRA? It is an employer funded account that reimburses employees for qualified out-of- pocket medical expenses. HRA’s have been around for a while but prior legislation has limited their use and application. However, recent changes have brought them back to the forefront. The biggest benefit of an HRA is that employers are able to deduct the contributions and employees don’t have to include the reimbursements in their income. These expenses can now in certain cases include reimbursements for insurance premiums.
Here are some limited details on the three most common types of HRA plans:
QSEHRA (currently available): Must have 50 or fewer employees, cannot offer group health insurance, not available to owners, annual contribution limits, premium tax credits must be reduced by benefits received, participants do not need to maintain health insurance.
ICHRA (Available in 2020): No employee limits, eligibility and benefit can be separated by employee classes, not available to owners, no annual contribution limits, ICHRA participants not eligible for premium tax credit, participants must maintain qualifying health insurance.
One Person HRA (currently available): Must only have only one employee, must sponsor health insurance, not available to owners but may be available to spouses, no annual contribution limits.
I have only highlighted some of the details in this article. Given the fact that all plans require a written document, it is recommended that you visit with us regarding your situation. Please give us a call at 208-229-1040 and see if an HRA could be right for you.
Sam Clegg, CPA