One of the key steps President Trump took when he signed his executive order in October, 2017, was to expand employers’ ability to give their workers money to buy non-group health coverage on the individual market.
The vehicle for this concept is the Health Reimbursement Arrangement (HRA – more commonly referred to as an “Account”). This is a type of employer-funded health benefit plan designed to reimburse employees for out-of-pocket medical expenses, as well as insurance premiums. Funded solely by the employer (and not through salary deductions). While defined as a “benefit plan,” an HRA is NOT a form of health insurance.
While HRAs were initially used to purchase insurance on the individual market, ACA changed all that by banning their use to buy individual health insurance policies. This presented a problem for many small employers with HRAs in place, who continued to fund and operate them, without realizing that, with the implementation of ACA, much of the structure they put in place was against the rules!
In December, 2016, Congress introduced a new provisions that permitted HRAs, with specific criteria, thus getting around the ACA restrictions:
The HRA is funded solely by an eligible employer (primarily under 50 full-time-equivalents, or FTEs). As before, employees may NOT contribute to them through salary reductions.
The HRA provides reimbursement to an eligible employee for expenses for medical care (as defined in Code section 213(d)) incurred by the eligible employee or the eligible employee’s family members (as determined under the terms of the Arrangement);
For 2018, the amount of payments and reimbursements in a calendar year cannot exceed $5,050 for an individual, and $10,250 for the whole family.
The HRA is provided on the same terms to ALL eligible employees.
Under ACA, HRA funds could be used for medical expenses, but not insurance premiums. Now, the president’s executive order changes that by expanding the flexibility and use of these employer-funded accounts, thereby giving employees more options for coverage, including individual policies.
What this means to employers with less than 50 FTEs is that the benefit of setting up HRAs for their eligible employees is now expanded, making it an added “perk” to attracting and keeping new talent. Spiralight Group Benefits has the expertise and experience in putting these structures in place, and maintaining them within DOL guidelines.
To remain compliant, Implementation of a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) requires special care and configuration. Directly giving employees money to buy health insurance is not an acceptable practice. A formal Health Reimbursement Arrangement that uses a Third Party Administrator, creates Summary Plan Description (SPD) and implements a compliant solution is required. To avoid non-compliance, HIPAA violations, discrimination issues and unintended tax consequences contact Matt Byrne, CEO of Spiralight Group Benefits visiting (calendly) to schedule your no-obligation Strategy Session.Schedule My Strategy Session
Matt Byrne has made a career helping people find affordable health insurance. He is the founder of Spiralight Group Benefits, a Dublin Ohio-based brokerage providing comprehensive insurance, HR consulting and compliance solutions for small- to mid-size businesses. Matt has a Bachelor of Arts degree from Boston University and holds a life and health insurance license. He also serves on the executive board of Columbus chapter of the National Association Health Underwriters. Mr. Byrne is a subject matter expert speaking frequently about Health Care Reform, Employer Health Plans Affordability Programs, Self-Funded Solutions and is frequently quoted in national publications such as the Money Magazine, U.S. News and World Report and The Wall Street Journal. Matt can be reached at (614) 300-1316 (assistant) or https://www.grouphealthohio.com/