Let’s talk about health reimbursement arrangements (HRAs) for a minute. These plans are becoming more popular among employers as companies look for new ways to expand existing or offer alternative health benefits to their employees. You might be working for one of these companies yourself and have an HRA benefit as part of your health insurance plan.
Whether it’s your first time using an HRA or your employer has been offering an HRA benefit for a while now, it’s not uncommon to have questions. You understand that an HRA is designed to help employees pay for qualifying expenses. But to help you better understand your HRA offering as an employee, we have compiled a roster of inquiries based on three of the most frequently asked HRA questions.
How Is an HRA Setup?
This is a common question because HRAs aren’t like traditional insurance plans or products. Understanding how HRAs are structured can help you better leverage their benefits.
Who Handles the HRA Funds?
As an employer-offered product, it’s typical for the employer to also handle the funding for its own employees’ HRA plans. After all, it’s your company that pays for the HRA. It is not uncommon, however, for some companies to outsource their fund management to a third-party administrator or health insurance vendor partner.
Ultimately, it’s up to the offering employer to determine who handles the funds and how those allowances are distributed. As an employee, you may receive your reimbursements with your regular paycheck, as a separate check, or ACH transfer. If you aren’t sure about your fund management process, connect with your company’s human resources contact for verification.
Can I Take It with Me If I Leave the Company?
An HRA can often be confused with a company-sponsored flexible spending account. But HRAs are very different, and employees don’t make contributions to their own allowances. And because the program is entirely funded by your employer, it ultimately means those funds are owned by the company. Should you leave your employer, you won’t be taking the HRA plan or funds with you. You could, however, continue to maintain enrollment in that same health plan if you were willing to pay the entire premium amount out of your own pocket. Or, at this point, you could check your eligibility with APTC.
Does ‘Use It or Lose It’ Apply?
Since the HRA plan is different from the flex-spend account you may have more familiarity with, you might be wondering if any HRA funds can be rolled over year after year. Employers have the option to decide. Check with your company’s human resources professional to verify if, in fact, you have rollover options for unused HRA funding. If your company has opted not to allow for rollover, you may have a runout period for submitting expense reimbursements. As we near the end of 2020, you will want to get any applicable medical costs submitted to ensure you are properly provided with your HRA allowances.
How Does the HRA Work?
Employees sometimes get confused or even forget they have an HRA benefit to help with some of their medical expenses. Because there are some gray areas about how each employer structures their HRA offerings, here are a few common HRA questions and answers to help eliminate any confusing details about how these plans typically work.
How Are Reimbursements Managed?
Your employer will have a policy and procedure outlined for how you should submit your HRA expense requests. Employees will typically have to provide proof and documentation of the expense, including cost and date. If you have out-of-pocket medical bills, consider collecting the necessary information for submission. Invoices and explanations of benefits are usually a good place to start. The reimbursements will be processed and paid, based on your employer’s specific procedure, and will cover the employee and any participating dependents.
What expenses are eligible?
The IRS allows tax-free reimbursement of certain health care expenses through an HRA, generally those services with the purpose of alleviating or preventing a disability or illness. Examples of healthcare costs that tend to be approved include routine doctor or dentist visits, prescription medications, and health insurance premium payments. Other covered expenses can include hospitalizations, emergency services, and at-home first aid kit purchases. Verify with your employer’s primary HRA contact to be sure what is and isn’t covered for your particular HRA plan.
How Long Does It Take to Receive Reimbursements?
Employers have the discretion to layout their internal procedures for HRA expense approval and reimbursement. Some companies turn around payments by the next payday or within a ten-day window. Others may take longer to review the submissions or have a larger pool of employees to verify. So, it’s possible to wait 30 days in some cases to see those funds reimbursed. Check with your employer with your HRA questions to understand your timeline expectations.
Does an HRA Affect My Tax Credit?
Another common HRA question from employees tends to involve federal subsidies. People want to know if having or using an HRA will affect the Marketplace subsidies used to offset those healthcare plan premium costs.
In general, employees can’t have their cake and eat it, too. If you find yourself eligible for a premium tax credit because the allowance is considered unaffordable, you have to pick the ICHRA or the tax benefit. The individual coverage health reimbursement arrangement is designed to help employers provide a similar benefit to the premium tax credit.
Your employer may have fewer than 50 employees and be offering a qualified small employer health reimbursement arrangement. If you have a QSEHRA offering, and you’re also eligible for the premium tax credit, you should be able to reduce the credit based on the amount of the HRA allowance you’re being offered. This is regardless of how much you receive in reimbursements.
Sometimes also referred to as an integrated HRA, the Group HRA is designed to be offered with a group health insurance plan. With an employer-paid group plan, you won’t have to worry about qualifying premium tax credits.
HRA benefits can be game-changers for employees who could use the extra reimbursements to cover medical expenses and healthcare costs. Hopefully, answering some of these common HRA questions provides insight into understanding your plans. Of course, it’s always a good idea to consult your company’s human resources contact or HRA facilitator with specific inquiries. And you can always rely on the guidance of W3LL to help you navigate the Marketplace.