You might need heard of well being reimbursements by now, and if you happen to’re contemplating them as a advantages resolution and worker retention technique to your firm, it is a good suggestion to weigh the HRA account professionals and cons earlier than selecting one which works for you.
These tax-advantaged instruments are a game-changer for employers and workers alike. They permit employers to reimburse workers for medical insurance premiums and certified medical bills. Sounds wonderful, proper? They’re!
Everybody loves checklist, so let’s dive proper in to an HRA account professionals and cons checklist.
HRA account: what’s it?
First issues first, let’s clear up some confusion: an HRA will not be a reimbursement account, like a well being financial savings account (HSA) or a versatile spending account (FSA), it’s a reimbursement association. There’s not an account put aside into which workers make a contribution. In actual fact, health reimbursement arrangements are fully funded by employers.
These funds are then used to reimburse workers after they submit receipts. The principle two HRAs are the person protection HRA (ICHRA) and the certified small employer HRA (QSEHRA).
HRA Account Execs and Cons
This is what to learn about HRA account professionals and cons.
Execs and Cons of Well being Reimbursement Preparations
Let’s begin with the advantages of HRAs.
Execs:
- Nice for companies of any measurement: ICHRAs work with companies of any measurement, whereas the QSEHRA is for companies with 50 workers or much less
- Workers can select their very own suppliers and plans
- Reimbursements for ICHRA may be supplied to workers at completely different charges primarily based on job-based standards like full-time/part-time, geographical location, and many others. QSEHRA must be supplied equally throughout all kinds of workers however may be scaled as a consequence of household measurement or age.
- Relying on the HRA design, workers can use them to pay for insurance coverage premiums, medical bills, or each
- When an organization affords a QSEHRA or an ICHRA plan, workers are eligible for a particular enrollment interval, which suggests they will store a serious medical plan on the person market at the moment (and out of doors of the standard open enrollment timeframe)
- Unused HRA account funds can rollover on the discretion of the employer yearly; in any other case the funds stick with the employer. In addition they rollover month over month.
Cons:
- Funds are usually not transportable; they stick with the employer if the worker leaves the corporate. (However the excellent news is that the worker retains their well being plan!)
- Not at all times attainable to mix with a bunch plan. In case your workforce has a bunch plan that they actually like, they is likely to be hesitant to surrender that trusted group plan.
- Relying on the HRA, there could also be contribution limits (see 2025 QSHERA limits), which could impede an employer from giving the beneficiant quantity they really need.
- If particular person insurance coverage markets in your space are weak, your workers will not have as many choices as they could like.
- Sharing ministry plans are usually not eligible for ICHRA however just lately proposed rules will clear up some gray space in the case of sharing ministries and QSEHRAs. Whereas they will not be thought-about medical insurance, they are often reimbursed as a medical expense. That is excellent news!
Can’t get sufficient of those HRA account professionals and cons?
We’ve damaged down the 2 foremost kinds of HRAs (ICHRA and QSEHRA) obtainable for 2025 and compared them here. Extra in regards to the ICHRA is here. We examine the QSEHRA to group plans here.
→ Find out about Health Reimbursement Arrangement Rules for ICHRA and QSEHRA.
→ Evaluate HRA vs HSA
→ Evaluate HRAs vs Group Plans.
→ Be taught extra about our HRA administrator platform.
This submit was initially revealed in 2020 and has been up to date with new data and insights for 2025.
