HRA Insurance: A Comprehensive Guide

Are you looking for a flexible, cost-effective way to offer health benefits to your employees? A Health Reimbursement Arrangement (HRA) might be the solution you need. In this article, we’ll cover everything you need to know about HRA insurance, including what it is, how it works, and the benefits it offers.

What is HRA Insurance?

An HRA is an employer-funded health care reimbursement arrangement that allows employees to be reimbursed for qualified medical expenses. Employers set aside a certain amount of money for each employee, which can be used to cover eligible medical expenses such as deductibles, copays, and prescriptions. The funds are tax-free for both the employer and employee, making it a tax-efficient way to provide healthcare benefits.

How Does HRA Insurance Work?

When an employee incurs a medical expense, they can submit a claim to their employer for reimbursement. The employer then reimburses the employee for the eligible expense from the HRA funds. The employer can set specific rules for the HRA, such as the types of medical expenses that are covered, the maximum amount that can be reimbursed per year, and whether funds roll over from year to year.

HRAs are typically designed to be used in conjunction with a high-deductible health plan (HDHP). The HDHP provides the employee with catastrophic coverage and the HRA reimburses them for out-of-pocket medical expenses up to a certain amount.

What Are the Benefits of HRA Insurance?

There are several benefits to offering an HRA as part of your employee benefits package:

Types of HRAs

There are several types of HRAs to choose from, each with its own set of rules and regulations:

Group Coverage HRA (GCHRA)

A GCHRA is a new type of HRA that was introduced in 2020 as part of the Affordable Care Act. It allows small businesses to reimburse employees for individual health insurance premiums and other qualified medical expenses. The GCHRA is only available to employers with fewer than 50 employees and cannot be offered in addition to a traditional group health plan.

Integrated HRA

An Integrated HRA is a type of HRA that is integrated with a group health insurance plan. The funds in the HRA can only be used to reimburse employees for out-of-pocket expenses after they have met the deductible in the group health plan.

Stand-Alone HRA

A Stand-Alone HRA is an HRA that is not integrated with a group health insurance plan. It can be used to reimburse employees for any eligible medical expenses, regardless of whether they are also covered by the group health plan. However, under current regulations, stand-alone HRAs can only be offered to retirees or employees who are not eligible for group health coverage.

HRA Insurance FAQs

Q: What types of medical expenses are eligible for reimbursement with an HRA?

A: Eligible expenses include co-pays, deductibles, prescriptions, and other out-of-pocket medical expenses. The IRS provides a full list of eligible expenses on its website.

Q: Can an HRA be used to pay for health insurance premiums?

A: It depends on the type of HRA. A GCHRA can be used to reimburse employees for individual health insurance premiums, while an integrated HRA can only be used to reimburse employees for out-of-pocket expenses after they have met the deductible in the group health plan.

Q: Can an employer offer both an HRA and a traditional group health plan?

A: Yes, an employer can offer both. However, the HRA must be integrated with the group health plan, and the employer cannot offer a stand-alone HRA.

Q: Is there a limit to how much an employer can contribute to an employee’s HRA?

A: Yes, there are annual limits on HRA contributions based on the employee’s age and whether they have family coverage. The IRS provides annual contribution limits on its website.

Q: Can unused HRA funds roll over from year to year?

A: It depends on the employer’s plan. The employer can choose to allow unused funds to roll over, or they can require employees to use all funds by the end of the plan year.

Conclusion

HRA insurance is a flexible, cost-effective way for small businesses to provide healthcare benefits to their employees. By reimbursing employees for eligible medical expenses, an HRA can help control healthcare costs while providing tax-efficient benefits to both the employer and employee. With several types of HRAs to choose from, employers can customize their benefits package to meet the specific needs of their employees and their business.