As a business owner looking to provide employees with health benefits, you should know there are more options than traditional group health insurance. Yes, really! It’s very exciting, we know. One of the ways you can do this is to offer your employees healthcare reimbursement for their medical expenses. Rather than your company shouldering health insurance for every employee and navigating the ever-changing (and rate-increasing) insurance game, your employees can choose the individual health insurance plan they want and get reimbursed for it. It’s simple. And we know business owners want to simplify things whenever possible.
What is reimbursement in healthcare?
Healthcare reimbursement plans are a type of employee benefit where employers reimburse employees for medical expenses.
How does reimbursement work in healthcare?
The employer sets the benefit allowance available rather than choosing and administering a group health insurance plan from a carrier. It’s not insurance, it’s better! Think of it as reimbursement insurance. This is an employer-funded, tax-advantaged health benefit plan that lets businesses reimburse employees for their medical expenses.
What are health reimbursement arrangement rules?
Individual coverage health reimbursement arrangement (ICHRA) is a type of employer-sponsored insurance program. With an ICHRA, employers offer employees the opportunity to use funds set aside by the employer to cover their out-of-pocket medical expenses. ICHRA funds can be used to pay for eligible expenses like monthly premiums, co-pays, and prescription drug costs.
Health insurance reimbursement
A health reimbursement arrangement (HRA) is a way to save money on your health insurance costs. With an HRA, you can reimburse employees for medical expenses with pre-tax dollars instead of paying those expenses directly out of pocket to a group insurance plan. This means that any money spent on eligible items will be reimbursed through the HRA and, therefore, not counted as taxable income by the IRS. For example, a business can offer employer reimbursement for health insurance premiums (and other qualified medical expenses), rather than offering a group health insurance plan.
How does health insurance reimbursement work?
Employees shop for a health plan that works best for their families and then get reimbursed on their paychecks. This allows employers to reimburse their employees for health insurance rather than choosing it for them.
You’ll decide which health insurance HRA is best for you. Take Command offers two types; Individual Coverage HRA (ICHRA) and Qualified Small Employer HRA (QSEHRA).
You’ll want to work with an HRA administrator to facilitate the program (and ensures HIPAA and IRS compliance for HRAs), so you don’t have to spend time dealing with reimbursement claims. Your HRA administrator will also inform you about all the health reimbursement account rules and ensure you’re compliant.
With an HRA, you can remove the headache of traditional business-offered health insurance plans and put the power back into the hands of your team by providing reimbursements for qualified health care expenses. HRAs give employers flexibility and empower employees to take charge of their health insurance plans.
How does a health reimbursement arrangement work?
If you’re unfamiliar with the types of reimbursement insurance, or HRAs, you might be wondering – how does a health reimbursement arrangement work? Think of HRAs as reverse-engineered insurance. This model takes traditional group insurance and extracts the best parts (health benefits) while ditching the rest (rate hikes, rigidity, unpredictability) and adds an extra layer of support through excellent customer service provided by HRA administrators and software.
Set up an HRA in four easy steps
- Employers design their plans and set reimbursement allowances. The employer sets up an HRA account and decides how much to allocate for tax-free reimbursement.
- Employees pay for their health insurance and medical bills. Each employee decides on the health insurance plan that works best for them and pays out of pocket for monthly premiums and other medical expenses.
- Employees provide proof of their expenses to your HRA administrator. Employees submit proof of purchase as a receipt or invoice for products or services through a secure portal provided by the HRA administrator.
- Employers reimburse the employee. Administrators like Take Command handle everything so your employee will get reimbursed on their next paycheck.
Common HRA questions and answers
Q: What is insurance reimbursement?
A: In short, insurance reimbursement is the money paid to a healthcare provider to cover the costs of services provided. In the insurance world, if your plan isn’t in network with a provider, you can still get a percentage of costs reimbursed by your insurance. If you have an HRA, you get insurance reimbursement through your employer, in that you submit receipts for your premiums and other medical expenses, and the employer reimburses you directly.
Q: How does health insurance reimbursement work?
A: Through the HRA plan set up by an employer to cover medical expenses for its employees, the employer decides how much to allocate, and employees request reimbursement for medical expenses up to that amount. Your HRA administrator will outline the health reimbursement account rules and ensure compliance.
Q: Why is healthcare reimbursement important?
A: The HRA model is becoming more popular because it allows employees to choose the health insurance they want. This means they can choose the providers they want, which expenses they want to be reimbursed, and aren’t tied to a company health insurance plan. As an employer, offering an HRA — among all the types of reimbursement in healthcare — is a simple and effective way to attract top talent and invest in your employee’s health and well-being.
Individual coverage health reimbursement arrangement (ICHRA)
An ICHRA allows employees to select their own health insurance plan based on their own unique needs. Through the ICHRA, employees submit medical expenses to their employers who then reimburse approved purchases.
Health insurance compliance is regulated by the IRS, so it’s essential to ensure your business is keeps up with legal requirements. Take Command can help with that! A list of general ICHRA rules includes:
- Health insurance benefits must be offered fairly to groups of employees.
- There are no maximum limits to how much an employer chooses to reimburse.
- Employers can choose what they will reimburse (insurance premiums, qualified medical expenses, or both).
- ICHRA plans must abide by affordability guidelines.
Additional resources →
How to set up an ICHRA
Setting up an ICHRA health insurance plan for your business is easy with Take Command’s ICHRA administration software. Your administrator works with you to ensure a seamless and streamlined process from start to finish. Here’s a quick glance at how to set up an ICHRA.
- Step 1: Determine the start date
- Step 2: Determine employee eligibility
- Step 3: Determine your budget
- Step 4: Complete legal documentation
- Step 5: Inform employees of new health care benefits.
- Step 6: Support employees in choosing individual health insurance
- Step 7: Start reimbursing!
Additional resources →
Health reimbursement account eligible expenses
Now that your ICHRA is set up, what’s considered health reimbursement account eligible expenses? And what are the HRA eligible expenses 2023? To answer those questions, ICHRA can be used for various qualified medical expenses in the following categories:
- Doctor visits
- Medical equipment
- Dental procedures
For a detailed list of covered expenses, check out our blog What medical expenses are reimbursable through ICHRA?
Employers provide employees with an HRA plan document that outlines important information about how to maximize the HRA. Employers have a set amount of HRA funds each month allocated for reimbursements. To get the most out of your HRA, check out this list from IRS of items that can be reimbursed as outlined in IRS publication 502.
About Take Command
Take Command is a recognized leader in HRA administration and small business HRA tax strategy. Our team is passionate about HRAs and the impact they can have on a business. We’re ready to help you take your health benefits offerings to the next level!
Chat with our team of HRA administrators with any questions you may have about these new, tax-friendly benefits or check out our ICHRA Guide for more information on its background, setup process, requirements, and rules.