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Health Reimbursement Arrangements

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    • Health Reimbursement Arrangements (HRA)

    Take control of your healthcare costs and minimize out-of-pocket expenses with a Difference Card HRA.

    A Health Reimbursement Arrangement (HRA) provides employers with a flexible, tax-advantaged alternative to one-size-fits-all group health insurance. By leveraging an HRA, you can take control of your company’s healthcare costs while providing tailored benefits to your employees.

    As a top-tier HRA administrator, The Difference Card helps you unlock these benefits. We handle all the complexity, helping you reduce your financial burden and enjoy greater control over your healthcare expenses.

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    What Is an HRA?

    A Health Reimbursement Arrangement (HRA) is an employer-funded benefit plan designed to reimburse your employees tax-free for qualified medical expenses, including insurance premiums in some cases. It is an arrangement, not a bank account.

    Unlike a Healthcare Flexible Spending Account (FSA), where employees contribute their own pretax dollars, HRA products are solely employer funded. This structure gives you greater control over the plan’s design. You determine the types of healthcare expenses the HRA covers, such as deductibles, copays, prescription medications, and certain medical treatments. You can also specify any limitations or exclusions in the plan, ensuring that the HRA aligns with your budget and benefit objectives.

    It’s important to note that any unused funds in the HRA typically do not roll over to the employee’s next plan year. However, you may offer a carryover provision or allow a portion of the unused funds to be carried forward for future use.

    How Does an HRA Work? A Simple 4-Step Process

    An HRA allows an employer to fund a medical reimbursement benefit for their team without the complexity of managing a traditional group health plan.

    Below is the process:

    • You set the allowance: You determine the annual or monthly tax-free allowance you want to make available to your employees.
    • Employees make purchases: Your employees pay for insurance or eligible medical services and keep their receipts.
    • The administrator manages claims: The employee submits proof of their expense directly to The Difference Card through our easy-to-use portal or mobile app.
    • The administrator reimburses the employee: We verify the expense and reimburse the employee directly from your plan’s funds. You are only involved in funding the plan, not in reviewing individual claims.

    Types of an HRA: A Detailed Comparison

    The Individual Coverage HRA (ICHRA)

    An ICHRA is available to businesses of any size. It allows you to compensate your employees for health insurance premiums and other qualified medical expenses. A key feature of the ICHRA is its flexibility. You can use employee classes — full-time, part-time, salaried, and nonsalaried — to offer different allowance amounts and design benefits that cater to specific workforce segments.

    If you provide an ICHRA that the government regards as “affordable,” your employee is no longer eligible to receive Advanced Premium Tax Credits (APTC) from the marketplace. This rule makes the ICHRA a true replacement for traditional group plans and government subsidies.

    The Qualified Small Employer HRA (QSEHRA)

    A QSEHRA is an HRA for a small business with fewer than 50 full-time equivalent employees. With a QSEHRA, you can reimburse employees for individual health insurance premiums and medical expenses, but the Internal Revenue Service (IRS) sets specific annual contribution limits.

    Unlike an ICHRA, you cannot offer a QSEHRA if you also provide a group health plan to any of your employees. This HRA type also requires offering the same terms and allowance amounts to all full-time employees.

    If an employee with a QSEHRA account is also eligible for a premium tax credit, they must report their HRA allowance, which reduces their subsidy amount dollar-for-dollar.

    The Group Coverage HRA (GCHRA)

    A Group Coverage HRA (GCHRA), or Integrated HRA, pairs with a traditional group health plan. It is often combined with a high-deductible health plan (HDHP) to help employees cover out-of-pocket costs like deductibles, copayments and coinsurance. This allows you to offer a more robust benefits package while managing premium costs.

    The GCHRA doesn’t cover the integrated group plan premiums since its purpose is to assist with out-of-pocket expenses after paying the premium. This structure makes it suitable if you want to offer a high-deductible plan to save premiums while still safeguarding your employees from high up-front costs.

    The Excepted Benefit HRA (EBHRA)

    An Excepted Benefit HRA is not a stand-alone health plan. It lets employers reimburse employees for specific, limited benefits. To offer an EBHRA, you must also offer a traditional group health plan — though employees don’t have to be enrolled in it. You can use the EBHRA for dental, vision, and other excepted benefits, excluding major medical insurance premiums. The IRS sets an annual contribution limit for this HRA type.

    You must offer the EBHRA on the same terms to all similarly situated employees, ensuring fairness across the workforce for these supplemental benefits. Because it is offered independently of enrollment in the main group plan, it provides a valuable perk even for employees who might get their primary health coverage elsewhere, like through a spouse. It’s a great way to round out a benefits package by covering common expenses that major medical plans often don’t.

    Employers have access to several types of HRA products, each with its own rules and use cases. The primary models are the Individual Coverage, Qualified Small Employer, Group Coverage, and Excepted Benefit HRA.

    HRA vs. HSA vs. FSA: Understanding the Key Differences

    Feature Health Reimbursement Arrangement (HRA) Health Savings Account (HSA) Flexible Spending Account (FSA)
    Who Funds It? Employer Employer and/or employee Employer and/or employee
    Who Owns the Account? Employer Employee Employer
    Do Unused Funds Roll Over? Up to the employer Yes, funds never expire Optional (limited rollover or grace period may be offered)
    Is it Paired With a Specific Health Plan? Varies by HRA type (GCHRA and EBHRA require a group plan) Must be paired with a High-Deductible Health Plan (HDHP) Typically offered with any non-HDHP plan
    Contribution Limits No federal limit for ICHRA and GCHRA. QSEHRA and EBHRA have IRS-set limits Yes, set annually by the IRS Yes, set annually by the IRS

    HRA Benefits for Employers

    Health Reimbursement Arrangements (HRA) offer several benefits for employers:

    • Cost control: HRA products give you more control over healthcare costs by allowing you to set contribution limits and choose eligible expenses. This flexibility is critical for more effective budget management.
    • Tax advantages: Contributions made to an HRA are typically tax-deductible for employers, offering potential tax savings.
    • Customizable plans: You can design an HRA to align with your employees’ specific needs and demographics, providing tailored benefit offerings and increasing employee satisfaction.
    • Flexibility for remote teams: An HRA enables you to provide equitable benefits to employees in different geographic locations without being tied to regional insurance networks.
    • No “use-it-or-lose-it” waste: Unused funds stay with the employer, so they only pay for the healthcare employees actually use.
    • Talent attraction and retention: HRA products enhance the overall benefits package, making your company more appealing to potential employees and aiding in employee retention.
    • Improved employee health and productivity: An HRA supports employees in accessing necessary healthcare services, promoting wellness and productivity in the workplace and maximizing the potential for business success.

    HRA Benefits for Employees

    Health Reimbursement Arrangements (HRA) offer employees various advantages:

    • Financial assistance: HRAs provide reimbursement for medical expenses, reducing the financial burden of healthcare costs.
    • Clarity on healthcare benefits: Employees know exactly how much their employer is contributing to their healthcare each year.
    • Coverage for a wide range of expenses: Your team can use HRA funds for various healthcare expenses, supporting their well-being.
    • Customizable coverage: Employees can tailor their healthcare coverage to their specific needs, promoting personalized and comprehensive care.
    • Tax-free reimbursements: Employees receive reimbursements without paying income tax, maximizing the value of their healthcare benefits.
    • Plan choice: With an ICHRA or QSEHRA, your employees can select the individual insurance plan that fits their personal needs, giving them greater choice and control over their health coverage.
    • Access to quality care: Employees have the freedom to choose preferred healthcare providers and services, ensuring access to high-quality care.

    What Expenses Are Eligible for HRA Reimbursement?

    In an HRA plan, the reimbursement of various healthcare services is a key component. Plan administrators typically provide reimbursements for a wide range of medical expenses, including:

    • Doctor’s office visits
    • Hospital services
    • Prescription drugs and over-the-counter products
    • Health insurance premiums — for ICHRA and QSEHRA
    • Coinsurance
    • Deductible expenses
    • Dental and vision care
    A young man wearing a suit and glasses shaking the hands of a woman in a meeting

    How The Difference Card Delivers a Smarter HRA

    Unlike a standard carrier-integrated HRA, our Medical Expense Reimbursement Plan (MERP) technology allows us to build multiple, unique benefit plans on top of a single, cost-effective group plan from your insurance carrier. This approach means you can offer more generous benefits to your employees, like lower deductibles and copays, while saving on healthcare costs. Our structure also gives you the freedom to change insurance carriers whenever you choose.

    By loading HRA funds directly onto The Difference Card, employees gain convenient access to their benefits. They can easily swipe the card at the point of service for eligible expenses outlined in the HRA plan documents. As an employer, you benefit from detailed reporting provided by The Difference Card, which presents HIPAA-compliant aggregate data on HRA utilization.

    This streamlined process ensures a seamless experience for your employees and enables you to monitor and analyze the effective utilization of your HRA funds.

    Frequently Asked Questions About HRA Products

    Can Business Owners Participate in an HRA?

    Generally, no. Sole proprietors, partners, and S-Corp shareholders — who own more than 2% of the company — are typically not considered employees and cannot participate in an HRA. C-Corp owners, however, are employees and can participate.

    What Happens to Unused HRA Funds at the End of the Year?

    Since the employer owns the HRA, any unused funds at the end of the plan year revert to the employer. Unlike an FSA, there is no “use-it-or-lose-it” pressure on the employee, as they are not contributing their own money.

    Are There Minimum Contribution Requirements?

    No, there are no federal minimum contribution requirements for any type of HRA. Employers have the flexibility to set allowance amounts that fit their budget.

    How Does an HRA Work With Premium Tax Credits?

    This depends on the HRA type and whether the HRA is considered “affordable.” If an employee is offered an affordable ICHRA, they are not eligible for premium tax credits. If the ICHRA is unaffordable, they can opt out and claim their tax credits. Employees with a QSEHRA must reduce their tax credit by the amount of their HRA allowance.

    Can Employees Withdraw Money From an HRA Account?

    No, employees cannot withdraw cash from a Health Reimbursement Arrangement (HRA). It is an employer-funded reimbursement plan, not a bank account. The funds remain with the employer until the employee incurs an eligible medical expense.

    How Can You Check an HRA Balance?

    Employees can check their balance through the online portal or mobile app provided by the HRA administrator. For employers, an administrator dashboard provides high-level, aggregate data on plan utilization for budgeting purposes, while maintaining employee privacy.

    Who Is Eligible for an HRA?

    The employer determines employee eligibility depending on the type of HRA they choose to offer. Generally, only W-2 employees can receive HRA benefits.

    Partner With The Difference Card Today

    Ready to see the difference with a reputable HRA administrator? Request a proposal today and let us show you how our unique approach can generate significant savings on your healthcare spend while enhancing the benefits you offer your team. Our expert team is ready to guide you in developing a smarter plan that supports your employees’ well-being and your bottom line.

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