You may need heard of well being reimbursements by now, and when you’re contemplating them as a advantages answer 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 staff alike. They permit employers to reimburse staff for medical health insurance premiums and certified medical bills. Sounds wonderful, proper? They’re!
Everybody loves a great 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 shouldn’t 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 staff contribute. The truth is, health reimbursement arrangements are fully funded by employers.
These funds are then used to reimburse staff 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 dimension: ICHRAs work with companies of any dimension, whereas the QSEHRA is for companies with 50 staff or much less
- Workers can select their very own suppliers and plans
- Reimbursements for ICHRA will be supplied to staff at totally different charges primarily based on job-based standards like full-time/part-time, geographical location, and so on. QSEHRA must be supplied equally throughout all forms of staff however will be scaled as a result of household dimension or age.
- Relying on the HRA design, staff can use them to pay for insurance coverage premiums, medical bills, or each
- When an organization gives a QSEHRA or an ICHRA plan, staff are eligible for a particular enrollment interval, which suggests they will store a significant medical plan on the person market at the moment (and outdoors 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 will not be 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 all the time doable to mix with a gaggle plan. In case your crew has a gaggle plan that they actually like, they could 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 staff will not have as many choices as they could like.
- Sharing ministry plans will not be eligible for ICHRA however lately proposed rules will clear up some gray space on the subject of sharing ministries and QSEHRAs. Whereas they will not be thought-about medical health 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 fundamental forms of HRAs (ICHRA and QSEHRA) out there for 2025 and compared them here. Extra concerning the ICHRA is here. We evaluate the QSEHRA to group plans here.
→ Study 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 put up was initially revealed in 2020 and has been up to date with new info and insights for 2025.
