Check out the new HRA solutions available for your employees
As a small business owner you may have always thought providing employee health care coverage was a good idea, but felt for various reasons it just wasn’t feasible for your company. Either the cost of health insurance was to high, or perhaps you’re in an industry that is difficult to meet mandatory participation requirements. The fact that you don’t provide benefits comes up regularly with employees and always during job interviews for new employees. Despite that you want to do all you can for your staff, opening up that benefits door always seemed like a path that was best avoided. Your efforts are best focused on keeping the business moving forward, which in turn provides jobs in the first place.
A new employee benefits model is available with an HRA
The good news is today there are newer options available that make offering employee benefits easy.
In the past offering group insurance was a one size fits all scenario. The business owner picked the group health insurance plan, and maybe also a dental plan. Unfortunately, whether employees like the plan, or not, often times depends on whether each person’s doctor or dentist is “in network”, a detail that is difficult for the business owner to know ahead of time. Explaining how your employees’s dependents are affected, cost sharing details, and provider networks cause concern and confusion for your team. All the while you’re trying to do something beneficial for your employees. Now you can throw that model out the door by providing employee benefits through a Health Reimbursement Arrangement.
What is this? A Health Reimbursement Arrangement (HRA) allows the employer to designate a monthly allowance per employee per month that each employee can use to be reimbursed for their cost of employee premiums and health care. If the employee doesn’t use the funds, they are then returned to the employer at the end of the plan year.
Here’s how it works. Each employee buys their own individual or family health insurance to suit their health care choices. Then the employer provides a reimbursement to the employee to cover the cost. For example, an employer may decide to reimburse full-time employees $300 a month, and part time employees $150 a month. The full time employee buys a health plan from the individual health insurance market for $280 a month. The employee is reimbursed out of their $300 budget, with an extra $20 to spare that is available for other employee medical costs. If the employee picks a more expensive health insurance plan for $350 a month, then the employee will use the full $300 allowance and need to also pay the remaining $50.00.
QSEHRAs and ICHRAs
There is a lot of jargon in the insurance and benefits world. To be clear, there are 6 different kinds of HRAs on the market today, but specifically there are 2 that reimburse for individual health insurance and Medicare premiums. These two are the ICHRA (Individual Coverage HRA) and the QSEHRA (Qualified Small Employer HRA). Not to be confused with a Health Savings Account (HSA). That’s has a different but related purpose that we won’t get into here.
QSEHRAs and ICHRAs have slightly different rules regulating each option. A QSEHRA is popular for small employers because it allows reimbursements for premiums when an employee is on their parent's or their spouse’s plan. It also allows employees to still receive government exchange premium subsidies. ICHRAs are popular for companies that want more flexibility in arranging staff into different reimbursement categories by full-time vs part-time, geography, seasonal, collective bargaining arrangements, and more. An ICHRA can also meet the ACA’s definition of large group health insurance required by the Affordable Care Act.
Advantages for Employees
One of the most frustrating parts of our current health insurance system is that people keep leaving their insurance behind and starting over. With each job change will come a new group health insurance option. Even when you stay with one company, the company itself may decide to change from one insurance company to another. Also families with two working parents have to decide which parent will include the kids on their plan each year.
Now with an HRA, each person or each family owns their own health insurance. The employer is simply supporting that health insurance purchase with a premium reimbursement. If an employee leaves their job, they still own their own health insurance, but loose the employer premium reimbursement. Hopefully as the HRA model gains more popularity, the new employer’s HRA reimbursement can simply pick up where the last employer left off. Imagine, no more worrying about COBRA and losing your health insurance when you leave your job!
It is important that employees receive appropriate health insurance, HRA support, and education to adopt to the new model. Choosing your own health insurance can feel like a daunting task for some people. Working with knowledgeable insurance agents and having access to either a public or private exchange is important. On the HRA side, having easy access to HRA reimbursements in order to put the reimbursement dollars back into employee’s bank accounts as soon as possible is key.
How Benafica can help.
Benafica offers employers and their employees full service HRA administration. Complimentary consulting services explain the different options to employers so each company can tailor their HRA plan to their own budget and employee benefit goals. On the employee side, each employee receives their own Benafica account to manage their HRA dollars and reimbursements. Health insurance consulting is also available by licensed representatives.
Let Benafica help your company. Contact us today!