What are HRAs?
Worrying about healthcare is not an (excuse the pun) healthy way to live. The worry will create stress and that can lead to further health problems. Too much stress can wear you down and make you sick, both mentally and physically. If you work for a small company then a small business HRA might be a great way to get help with your healthcare.
Small business HRA: A small business HRA (health reimbursement arrangement) or a qualified small employer HRA, is a health reimbursement arrangement for companies with less than 50 employees. It is not a Health Saving Account (HSA) but rather an arrangement that makes sure that small business employers can set aside a fixed amount of money every month.
Folks who work at the company can then use some of that money to buy their own health insurance. That isn’t all, employees can choose whether to use it for their premiums or they can submit health expenses for reimbursement.
Where did the small business HRA come from?
Near the end of President Obama’s second term, a bill was passed called the 21st Century Cures Act. This act had a provision that created the QSERHA (Qualified Small Employer Health Reimbursement Arrangement). Endorsed by both Republicans and Democrats the bill was a “small business-friendly” provision and many more “defined contribution” structures were also included in most major Republican healthcare reform plans.
How does it work?
Essentially all employees pay for their own health expenses. This means you as a business owner or manager don’t need to worry about getting a one size fits all plan for all your employees.
Richard Eden, Senior Vice President at David Lerner and Associates says, “It takes a lot of the paperwork and headache away from the business and sets the responsibilities on the individual employees to take care of their health insurance. They can then claim money back and you reimburse them.”
Each business can set its own plan in place and set a contribution limit so that they know how much the maximum claim would be. Employees will pay their insurance company or pay their doctor or clinic. They will then submit a claim to get reimbursed for their expenses tax-free. Employees need to provide proof of the amount they are claiming. Employers then reimburse the employee up to the set limit.
These are reimbursements — not health care coverage. Make sure you have your coverage in place so you don’t get any nasty surprises down the line.
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