As an employer, you know the health benefits you extend to your staff play an integral role in attracting and retaining high-quality talent. But as group health insurance premiums steadily increase, many employers find that enrolling in low-deductible group coverage is simply not a cost-effective option. So what’s an employer to do?
At Benafica, we want you to know you do have options, and it’s our goal to help you understand them. If your company is looking to minimize annual premium costs while continuing to offer group health insurance coverage, providing a group coverage health reimbursement agreement (GCHRA) is one way to do that. In this blog, our experts explain what you need to know about GCHRAs and how your company can benefit from offering one.
What Is a GCHRA?
A GCHRA, also referred to as an integrated HRA, is an employer-funded healthcare reimbursement arrangement designed to help offset the cost of employees’ qualifying personal healthcare expenses.
Reimbursements are tax free for both parties, and employees have the freedom to make healthcare purchases according to their needs. There’s no maximum annual contribution cap, and employers can issue different allowance amounts based on specific employee criteria.
Unlike other types of HRAs, a GCHRA can only be offered in conjunction with a group health insurance plan. Moreover, employees cannot request reimbursement for insurance premiums. Rather than covering the cost of insurance, a GCHRA is designed to reimburse for healthcare costs that are not covered by the employer-provided insurance plan.
In the vast majority of cases, employers elect to offer a GCHRA alongside a high-deductible health plan (HDHP) as this type of HRA is specifically designed to accompany such a plan. Although they are compatible with all group health insurance plans, it generally makes more sense to offer GCHRAs alongside high-deductible plans to help make up for employees’ loss in value.
How Does a GCHRA Work?
GCHRAs work much like any other type of HRA in that employees pay for healthcare expenses upfront and then submit reimbursement requests for qualifying expenses. However, there are a few key differences with a GCHRA that employers should be aware of. Here’s how the process breaks down:
- The employer designs the plan.
With a GCHRA, the employer sets a maximum monthly reimbursement allowance for qualifying employee medical expenses. As with other HRAs, the employer has full control over which expenses they choose to reimburse for and can also set allowances based on employee classes, family status, and age. Here’s what sets a GCHRA apart: The employer can control costs even further by setting specific employee deductibles and cost-sharing (co-insurance) amounts.
If the employer elects to set a deductible, employees must personally meet that dollar amount with their healthcare expenses to be eligible for reimbursements. If the employer chooses to opt for cost-sharing, they can determine a specific percentage of each reimbursable expense that employees are personally responsible for. The employer can also decide whether they’d like to roll over benefits from year to year.
- Employees make healthcare purchases.
Using their own money, employees make healthcare purchases according to their individual needs. They pay for those purchases at the time of service and request formal documentation as proof of payment. For a full list of eligible expenses, see IRS publication 502.
- Employees submit proof of payment for qualifying expenses.
To receive reimbursements, employees must submit formal proof of payment to the employer for their qualifying medical expenses.
- The employer reviews documentation and issues reimbursements.
After the employee submits proof of payment, the employer reviews all documentation to ensure it’s legitimate and the expenses qualify for reimbursement. If everything checks out and the employee has not exceeded his or her maximum monthly allowance, the employer then issues reimbursement.
Which Businesses Can Offer a GCHRA?
Unlike certain other HRAs, businesses of all sizes can offer GCHRAs to their employees. As long as the business offers a group coverage plan that meets minimum essential coverage requirements, the business can also offer a GCHRA. However, only those employees who participate in the employer-provided group coverage plan are eligible to take part in the GCHRA.
GCHRAs: Key Benefits
Providing a GCHRA to your employees as part of a well-rounded benefits package offers a you a number of benefits. With a GCHRA, employers can:
- Save on annual healthcare insurance premiums by offering a high-deductible health plan (HDHP) in conjunction with an HRA.
- Control benefit allowances based on employee classes, family status, and age.
- Help offset higher employee healthcare costs associated with HDHPs.
- Recruit and retain talented employees by offering an attractive benefits package.
- Reduce the risk of benefit fraud by reimbursing employees for eligible healthcare costs after they’ve already paid for those expenses out of pocket.
- Empower employees to purchase healthcare services according to their unique needs.
While offering a GCHRA offers a number of benefits, it’s important to note that ongoing healthcare reform has changed the way employers can use HRAs. If you’re planning to extend this healthcare subsidy option to your employees, it’s critical that you discuss your options and stipulations with an experienced broker to confirm that you meet the requirements.
Ready to Discuss Your GCHRA Options? Contact Benafica
At Benafica, it’s our mission to educate companies and individuals on the healthcare benefits available to them, so they can make the coverage decisions that best meet their needs. If you’re ready to learn more about your business’s health benefits options, feel free to give our team a call today at 651-287-3253 or send us a message, and we’ll be in touch promptly.
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