Can a Small Business Set Up Its Own HRA?

Can a Small Business Set Up Its Own HRA?

As a small business owner or principal, you are sold on the idea of implementing a Health Reimbursement Arrangement (HRA) for your employees. But there are different types of HRA platforms, and you may be wondering what your next step might be. Can a small business like yours set up and manage its own HRA internally? Can your existing Human Resources employee handle the HRA reimbursements process? And are there guidelines or benchmarks to getting started? We’ll take a look at HRA offerings as well as provide some direction on getting set up for 2021.

What You Can Do

If you’re ready to take the next crucial step and move forward with an HRA platform for your small business, you are free to do so on your own. There technically isn’t a requirement that prohibits you from establishing your HRA process internally. But there are key criteria you should consider first.

Choosing an Internal Administrator
The first step you’ll need to make as you launch an HRA is to select and appoint an administrator. But it’s important to understand what the role of an administrator does. This individual, who may be dedicated internally, is responsible for reviewing the submitted expenses and authorizing reimbursements. The self-administered HRA is certainly an option.

Determine Your Contribution Budget
Before you move forward, you will need to design and develop your HRA plan contributions. Small businesses feel the HRA solution is the most cost-effective way to offer benefits because of the cost-saving flexibility in this contribution determination step. You can work within your company benefits budget and will need to produce internal explanations of the plan for your participating employees. Smaller companies may have smaller contribution amounts.

Outline Reimbursable Expenses
There are guidelines per the Affordable Care Act that dictate for some types of HRAs, what can and cannot be reimbursable. You will need to develop an employee-facing explanation, informing your teams of what will and will not be reimbursed. For example, some HRA plans allow for reimbursement of an insurance premium, while others do not. Your employees will also more than likely need documents to help them understand how to submit a receipt or proof of an expense. You’ll also want to set the expectations with them for reimbursement payments timelines.

What You Should Avoid Doing

As you develop your company’s HRA plan, there are a few areas of the process that you may want to avoid. Here are a few missteps some small businesses often make when they attempt to set up the HRA program internally. These are common mistakes that can sometimes lead to costly remedies.

Avoid Waiting to Appoint an Administrator
Timeliness is critical when developing and launching your HRA. Don’t wait to make the decision about your choice of an administrator. In fact, this decision might be one of the first you make when designing your plan. The person in this position will be essential to getting a submissions process setup, applying a structure to your analytics, and communicating with your employees.

Don’t Roll Out an HRA Without Informing Your Employees
Chances are, a new HRA plan will be a new concept to some of your employees. Avoid rolling out a new setup without notifying your employees and offering support before doing so. The HRA benefits won’t apply if each staff member doesn’t first select Marketplace health insurance. And there will be deadlines for them to enroll and qualify. It’s also likely that employees will have ongoing questions about your process, what expenses are covered, and how they go about submitting proof of costs. Take the time to make all of the information available to them at every step.

Avoid Violating ACA Compliance
Many small businesses that self-administer run into compliance issues. Your dedicated administrator will need to be knowledgeable about not only the HRA guidelines but also HIPAA, COBRA, and ACA regulations, as well. Inadvertently violating a compliance measure can translate to costly fines. And these fines might far outweigh the cost benefits of setting up an HRA.

What Is Best for Many Small Businesses

You are free to set up your own HRA, but many small businesses make these key decisions when moving forward with an HRA launch. Not every solution will work for every business. But you might find these steps to be ideal for your company, as well. And making the HRA work for your employees and your bottom line is the ultimate goal, right?

Consider an HRA Administrator Software Partner
Partnering with a third-party administrator (TPA) as an HRA administrator is a favorable solution for many small businesses. Having a software partner that can serve as a digital administrator will streamline the process of managing, monitoring, and reimbursing employees. Employees will more than likely be more apt to embrace the process, too, with an easy-to-use dashboard for submitting receipts and tracking reimbursements.

Benefits of a Third-Party Administrator
Another considerable benefit of partnering with a third-party administrator is compliance. Don’t burden your internal human resources teams or benefits coordinators with knowing and monitoring the laws and compliance guidelines. You can also be sure to avoid costly penalties for unknown violations. Delegate the legal and Affordable Care Act rules to someone who is more suited to manage them.

Still Managing Your Company’s Budget and Reimbursements
Another perk of working with a TPA is the flexibility to continue managing your own costs and participation. The partner can ensure communication, support, and compliance. But ultimately, it’s still your business and your plan. So, you’ll maintain the ability to approve and disapprove submitted expenses. You’ll also have complete control over how you pay your employees for their healthcare-related expenses, often with the next month’s paycheck.

Getting down to business and preparing for your HRA launch is made easy with a W3ll partnership. With a variety of products available, including TPA platforms for HRA and ICHRA program management, you can delegate the setup tasks to W3ll. Take advantage of all of these HRA development and launch best practices and avoid common mistakes with a true benefits partner.

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