IRS Publication 502, Medical and Dental Expenses, defines medical care for the purpose of deducting medical expenses and reimbursing medical expenses through programs such as HSAs and HRAs. Health Reimbursement Arrangements, or HRAs, are defined contribution plans through which employers can reimburse their employees for eligible medical expenses.
Health Reimbursement Accounts have been a popular type of medical reimbursement plan used by employers to control healthcare costs. The Affordable Care Act (“Obamacare”), however, changed the rules for health plans including Health Reimbursement Accounts (HRAs). Are HRAs still available under Obamacare? Obamacare hasn't completely killed HRAs, but there are new rules HRAs need to follow. This article summarizes how HRAs can and cannot be used today.
Health Reimbursement Accounts (aka Health Reimbursement Arrangements or HRAs) are a simple tool used by employers to reimburse employees tax-free for medical expenses. And yet, because of their varied uses and new reforms, it is easy to be confused about how Health Reimbursement Accounts work today.
Health Reimbursement Arrangements, also referred to as Health Reimbursement Accounts or HRAs, provide small businesses an affordable health benefits solution. HRAs are growing in popularity because they allow small businesses to provide health benefits at an affordable cost. A common question from small businesses is "Who can administer the Health Reimbursement Account?"
Distributions from an HRA are simple, but there are IRS guidelines an employer and employees must follow. An HRA is a Health Reimbursement Arrangement. An HRA is an IRS-approved, employer-funded plan used to reimburse employees for medical expenses. An HRA is not health insurance, but can be used to supplement health insurance benefits and pay for a range of medical expenses not covered by insurance, including many insurance premiums.
Implementation of any health benefits program, including a Health Reimbursement Account, is key to the success of the benefits program. Educating and onboarding employees in a positive way makes plan management more successful in the long-term -- for both the business and for employees.
A Health Reimbursement Arrangement (HRA) is a flexible tool for small business owners to increase their tax savings and to offer tax-free health benefits. An HRA may reimburse for qualified medical expenses such as co-payments, deductibles, and personal health insurance premiums. HRAs are often used as a small business alternative to group health insurance. A common question from business owners and one-person nonprofits is "am I eligible to participate in the HRA?" This article reviews HRA owner participation for the following owner types and entities:
Here are three (3) ways stand-alone Health Reimbursement Accounts (HRAs) disrupt the small business health insurance industry. This article is adapted from Fastcompany.com's "7 Ways to Disrupt Your Industry" (June 4, 2012). #1 HRAs Increase Health Insurance Flexibility and Options for Small Businesses Stand-alone HRAs are health benefits paid for by an employer to reimburse medical expenses of its employees, their spouses, and dependents. HRAs are designed to give employees more choice and greater control over their health care coverage, as compared with traditional group health insurance. These five (5) HRA features disrupt the normal approach to small business health insurance, but ultimately lead to increased flexibility and options for small businesses: Employer Control: HRAs provide financial control for the employer. Why? Employers are able to define any amount to employees' HRA allowances. With HRAs there are no minimum or maximum contribution amounts. Employee Choice: With HRAs, employees are in full control of their health spending decisions. They can choose to use their HRA funds to reimburse medical expenses and health insurance plans of their choice. With an HRA, the employee chooses the carrier and plan that best fits their family's needs No Pre-funding: Unlike Health Savings Accounts (HSAs), HRAs do not require a separate account to hold the funds. Therefore, there is no need to pre-fund the allowances. Employers may simply use HRA software to manage the HRA and track reimbursements, leading to cash flow efficiency. No Participation Requirements: With an HRA, there are no minimum participation requirements that a small business must meet in order to offer an HRA. An HRA can be offered by a company of any size, even if only one (1) employee chooses to participate. Ease of Use: With an HRA, administering health benefits simply becomes a payroll function, adding reimbursements to paychecks. Whereas group health insurance plans require the employer to invest substantial time and resources into the administration and management, HRAs are easy to administer. HRA administration can take less than 5 minutes per month, allowing HR and payroll staff to focus on other areas of the business. With good HRA software, employees also have easy only access to view their HRA balance and submit requests for reimbursements. Additionally, unlike a group health insurance plan, there are no annual renewals with HRAs and the plan design can be changed at any time.
By offering a stand-alone health reimbursement arrangement (HRA), any small business can afford health insurance that helps recruit and retain key employees. How? With a stand-alone HRA, a small business offers employees a tax-free HRA allowance to purchase their own individual health insurance and other medical expenses. A stand-alone HRA is like a business expense account for health care.
Health Reimbursement Arrangement (HRA) health plans are powerful tools for small businesses because they are one of the only employee benefits vehicles allowed to reimburse insurance premiums tax-free. HRA health plans also give small businesses complete control over plan design and cost. For example, with an HRA health plan the small business decides: The amount to contribute to employees' health expenses. Which eligible medical expenses the HRA health plan will reimburse. What happens to unused HRA funds at the end of the year. Because HRAs are so flexible, there are many different ways for businesses to design HRA health plans. In this article, we'll run down the top seven ways businesses design HRA health plans to save money and meet their employee health benefit goals.
Disclaimer: The information provided on this website is general in nature and does not apply to any specific U.S. state except where noted. Health insurance regulations differ in each state. See a licensed agent for detailed information on your state. Zane Benefits, Inc. does not sell health insurance.