There is a lot of confusion about how health reimbursement arrangements (HRAs) can be used under the current healthcare laws. The Affordable Care Act (ACA) did change the way HRAs can be used, so it’s important to stay informed, lest your business be found noncompliant.
Here are 10 FAQs about HRA Plans in 2017.
1. What is an HRA Plan?
A health reimbursement arrangement (HRA) is a benefit plan that allows employers to contribute to their employees’ individual health insurance premiums and qualified out-of-pocket expenses by designating a specific allowance amount per employee per month. The employee submits receipts to a HIPAA certified benefits administrator for review, and approved expenses are then added as a tax-free line item on each employee’s paycheck.
2. Are there Different Types of HRAs?
There are generally three types of HRAs that businesses can use today:
- Integrated HRAs: These plans are paired with a group high deductible health plan (HDHP) in a similar way to health savings accounts (HSAs), but with the added benefit of having no limit on contributions.
- Retiree HRAs: These plans are used for people who have retired from your company.
- One-Person Stand-Alone HRAs: This type of HRA is not linked to any kind of insurance plan. It “stands alone” as a replacement for group health coverage all together and helps employees pay their individual health insurance premiums and out-of-pocket expenses. Under current regulations, it can only be used when one person is enrolled in the plan.
3. Can My Small Business Use HRAs?
Most likely, yes, but it will depend on how your benefit plan is structured. If your business is looking to reimburse employees for their individual health insurance premiums and out-of-pocket expenses, then compliant HRAs are limited to the One-Person Stand-Alone HRA.
If your company wants more than one employee on the benefit plan, then you would need to offer a healthcare reimbursement plan (HRP). An HRP is similar to an HRA, but reimburses only insurance premiums and preventive care expenses.
4. Who Can Contribute to an HRA?
5. Who Owns the HRA?
Employers, as they are the only ones making contributions.
6. What is the SBHRA?
The Small Business Healthcare Relief Act (SBHRA) is pending legislation that would create the Small Business HRA. It is sponsored by U.S. Senators Charles Grassley (R-IA) and Heidi Heitkamp (D-ND) and Congressmen Charles Boustany (R-LA) and Mike Thompson (D-CA).
7. What is the Status of the SBHRA?
The bill passed through the House of Representatives in June and is now in the hands of the Senate. If it passes the Senate vote, it will move to the President’s desk for consideration.
8. If the SBHRA Passes, How Would HRAs Change?
If the bill is passed, existing HRA regulations would not change. Instead, the bill would create a new "excepted benefit" available to small business owners, technically called the Qualified Small Employer HRA (commonly known as the Small Business HRA). It looks similar to the Stand-Alone HRA, with several notable differences.
First, the Small Business HRA would be limited to only qualified small employers (49 full time equivalents or less). Second, job classifications could not determine the allowance amount designated to an employee — meaning that executives could not receive a larger contribution than entry-level employees. Third, the SBHRA would cap the annual amount that an employer could contribute to each employee ($5,130 for single coverage, $10,260 for families for 2016).
9. When Will the Senate Review the SBHRA?
Unfortunately, there is no way to predict when they will vote on the bill.
10. How Can I Help?
If the SBHRA could impact your small business, be sure to contact your senator as soon as possible. The letters, phone calls, and emails senators receive show them what is important to their constituents. If they see correspondence regarding the SBHRA, they may be more inclined to make it a priority.
Although the ACA changed the way that HRAs can be used, there are still three types of health reimbursement arrangements that companies can implement. The passage of the SBHRA would greatly expand the menu of benefit plans available to small businesses.
Does your small business want to use an HRA? Download the eBook below to learn more!