Can Your Business Benefit From an HRA (Health Reimbursement Arrangement)?

2/8/2022

Can Your Business Benefit From an HRA (Health Reimbursement Arrangement)?

Healthcare coverage is an effective employee recruiting and retention tool.

It is not news that the talent shortage is making employers think about ways to attract and retain exceptional talent. Offering a range of benefits is one such method they are using, and the statistics bear them out: 80 percent of workers would keep a job with benefits rather than take one that offered more pay but no benefits. It should come as no surprise the Society for Human Resource Management found that retention (72 percent) and recruiting (58 percent) were top reasons companies increased their benefits.

Competitive Benefits

The different generations in the workplace value benefits differently, but health care is one benefit that appeals to all generations. The 2018 EBRI/Greenwald & Associates Health and Workplace Benefits Survey found that 73 percent of workers listed health insurance as one of the top three most important benefits.

The cost is high, however, especially if you want to ensure that you have a truly competitive plan. You may need to be prepared to pay a hefty amount of your budget for employee health care. Fortunately, you have choices. For example, the following two alternatives to traditional health care might be less costly and still keep your employees happy.

Health Reimbursement Arrangement

With a health reimbursement arrangement (HRA), the employer provides an allowance toward employees’ individually purchased health insurance premiums. HRAs often are more affordable than traditional health care because employers can choose their own contribution amount as long as they stay within federal guidelines. This is especially attractive to smaller employers because it allows them to provide health care without having to deal with participation requirements or minimum contribution percentages.

Individual Coverage Health Reimbursement Accounts

New in 2020, individual coverage health reimbursement accounts (ICHRAs) are a new option for employers. These plans, which are governed by complicated regulations, reimburse employees for individual health insurance premiums as long as the employee satisfies certain conditions, including the following:

Being enrolled in qualifying coverage
Having the option to opt-out annually
Not belonging to an employee group that has the option of traditional health care
Meeting age-related requirements (e.g., the maximum dollar amount provided to the oldest participant may not exceed three times the maximum available to the youngest participant)

Other Considerations

Companies have many other choices in offering health-care coverage. This makes it wise for companies to engage an employee benefits expert for guidance when evaluating a new or existing health insurance program. Among the many considerations are the following:

The company’s contribution strategy for health care (i.e., how much will individual employees pitch in for coverage, and what percent will the company pay)
The specific benefits that are important to your employees (e.g., a vision plan)
Tax considerations
Whether the company is available for any subsidies or incentives

If you need additional guidance about employee benefits, contact us today.