Over the last five years, the landscape of work has changed. Workers not only have more choice in who they work for and how they work, they are having more say in the types of benefits they want (hint: health insurance tops the list). This coupled with the high annual inflation of medical costs can cause employers to reevaluate their benefits package.

If you’re an employer looking for a cost-efficient way to bolster your benefits package– whether it’s because you’re trying to improve recruitment or retention efforts, or because you’re trying to reign in your health insurance spend, a Standard Health Reimbursement Arrangement (HRA) is a good option. Note: Standard HRAs are also known as Integrated HRAs, Group Coverage HRAs, or Traditional HRAs.

A quick definition

Standard HRAs are a tax-free way employers can reimburse employees for qualified out-of-pocket medical expenses. The accounts are employer-owned and employer-funded, meaning the employer can choose how much they will contribute to the accounts, the cadence of contributions, and the expenses for which they’ll reimburse. The IRS has general guidelines about eligible expenses, but employers may choose to further restrict that list. As an employer-owned account, unused funds will revert to the employer at the end of the plan. Employers also choose what happens to the account once the employee leaves the company either for retirement or otherwise.

How does it work?

In order to offer a Standard HRA an employer must also offer a group health insurance plan that meets the Affordable Care Act’s (ACA) definition of minimum essential coverage. However, your employee doesn’t have to elect group coverage through your company in order to participate in your Integrated HRA, they can instead have group coverage through their spouse’s employer.

The employer then constructs their HRA based on what works from a budget perspective and the values of the company. They decide:

• How much they’ll reimburse
• The expenses for which they’ll reimburse
• How the employees will access the money (i.e. will they have access to a debit card to pay for expenses directly, will they pay for the expenses first and submit for reimbursement or both?)
• What happens to unused money at the end of the year (does it roll over or expire?)
• Whether or not employees will retain access to the HRA when they retire

Once the employer has set up their Integrated HRA, they offer it to employees during open enrollment or a qualifying life event. If employees join the company outside of open enrollment, they can elect to participate in the HRA during their special enrollment period.

If you use an HRA provider like Lively, we help make HRA administration simple for employers and easy to adopt for employees. We take care of substantiation and expense management, as well as provide highly rated customer service for employee inquiries and account support for admins. We also offer a user-friendly admin platform with clear guidance and comprehensive employer reports.

What are the benefits of offering this type of plan?

Both employees and employers can benefit greatly when an Integrated HRA is included in the benefits package. Benefits of a Standard HRA include:

1. Lower health insurance costs for employers. More claims against the Standard HRA means fewer claims filed with the insurance carrier, helping maintain or lower insurance premium rates.
2. Greater flexibility in the types of health insurance plans that are offered. For example, in order to participate in an HSA, employees must be enrolled in a High Deductible Health Plan (HDHP), which might not work for them or their family. But a Standard HRA can be paired with any kind of group health insurance plan. That means employers can choose to offer the plans that work for their budgets and employees can choose the plan that works for their family and participation in the HRA isn’t affected.
3. Tax benefits. Employer reimbursements are considered a tax-deductible business expense.
4. Healthier and more productive employees. People with a way to pay for medical expenses are more likely to see the doctor when a health issue arises instead of waiting until it becomes an emergency. People who seek medical treatment are more likely to be healthy and the healthier your employees are, the more productive they’ll be.
5. Increased employee retention and more effective recruiting. Losing an employee costs a company between 1.5x-2x their annual salary and employees are more likely to leave if they don’t feel supported at work. Offering a Standard or Integrated HRA to help employees pay for out-of-pocket medical expenses can help them feel more supported and increase their loyalty. It can also serve as an effective recruiting tool.

How is it different from a stand-alone HRA?

Stand-alone HRAs include Qualified Small Employer HRAs (QSEHRAs) and Individual Coverage HRAs (ICHRAs) and serve the express purpose of helping employees purchase individual or family health insurance plans in the private market. So while Integrated HRAs are offered in conjunction with group health insurance, a QSEHRA or ICHRA can be offered in lieu of this type of plan. Another difference is, ICHRAs are intended to help pay for health insurance premiums while this type of expense is excluded from being reimbursed through an Integrated HRA. Other than that, they function very similarly.

Eligibility requirements

For employees to be eligible to participate in an Integrated HRA, they must be enrolled in a group health plan. That can be through their employer or their spouse’s employer. If they plan to reimburse for expenses for their spouse and dependents through the HRA, their spouse and dependents must also be covered by a group health insurance plan. Dependents must also be under age 27 in order to have their out-of-pocket medical expenses reimbursed through the arrangement.

Get started with Lively today!

If you’re looking to build a better benefits package for your employees or clients with a Standard HRA, reach out to Lively today!