ICHRA Archives - EZ.Insure

What Is an ICHRA?

An Individual Coverage Health Reimbursement Arrangement, commonly referred to as an ICHRA, is a benefit funded by employers that reimburses employees for health insurance premiums and qualified medical expenses. Unlike traditional health plans, where employees are limited to one or a few pre-selected coverage options, ICHRAs let workers choose the plan of their choice, and then receive tax-free reimbursements for the plan’s cost.

While Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) exist only for businesses with less than 50 employees, ICHRAs can be offered to businesses of any size. All in all, ICHRAs serve as a great alternative to traditional group health insurance, as they provide more flexibility to employees, while helping employers manage costs efficiently.

How Does an ICHRA Work?

Employers Decide on a Monthly Allowance: Business owners have the flexibility to decide how much or how little they wish to reimburse employees each month. This reimbursement amount can go towards the costs of employee premiums and other qualified medical expenses. It’s important to note that ICHRAs don’t have any IRS-imposed contribution limits, like QSEHRAs do.
Employees Purchase Health Plans of Their Choosing: Employees have the ability to select just about any health plan they want. This includes plans through the Marketplace, private insurers, or Medicare (if applicable).
Employees Submit Health Expenses: Employees provide proof of their premium cost as well as other eligible medical expenses as they come up. They will be submitted to either their employer directly or to a plan administrator.
Employees are Reimbursed Tax-Free: After submitted expenses are approved, employers reimburse employees tax-free. Additionally, the reimbursements are tax-deductible for employers.

Who Qualifies for an ICHRA?

Employer Eligibility

Unlike QSEHRAs that operate only for businesses with less than 50 full-time equivalent employees, businesses of any size can offer an ICHRA. This includes large corporations, small businesses, non-profits, start-ups and more!

Employee Eligibility

In order to participate in an ICHRA, employees need to be enrolled in an individual health plan that provides minimum essential coverage (MEC). Additionally, they must provide their employer with proof of this insurance plan in order to receive the proper reimbursements.

Plan Structure

Additionally, employers can structure ICHRAs differently for different groups of employees. For example, full-time vs. part-time employees, or salaried vs. hourly employees could have varying setups and restrictions.

How Much Can Employers Contribute to an ICHRA?

While QSEHRAs have maximum employer contribution limits set each year by the IRS, ICHRAs have no limit. In other words, employers have total control of how little or how much they wish to reimburse employees. Additionally, separate reimbursement rates can be assigned to different classes of employees, as long as everyone within the same class is treated the same.

What Medical Expenses Can an ICHRA Cover?

In addition to providing reimbursement payments for employer premium costs, ICHRAs can also provide monetary relief for a number of qualified medical expenses. These expenses include:

Prescription drugs
Over-the-counter medications
Preventative care
Doctors visits/copay
Hospital bills
Routine dental care
Routine eye care (exams, prescription lenses, and contacts)
Certain medical supplies or at-home equipment
Mental health services
Physical therapy
Chiropractic care

While the list of expenses that are eligible to be reimbursed by an ICHRA, they do not cover the following:

Group health insurance plans sponsored by a spouses employer
Medical expenses that aren’t IRS-qualified

What Are the Benefits of Offering an ICHRA?

Employers and Employee Tax Advantages: Not only are reimbursements tax-free for employees, but they are also tax-deductible for business owners.

Cost Flexibility for Employers: Employers have the freedom to contribute as little or as much in reimbursements as they want. Additionally, this amount can be adjusted on a yearly basis.

Plan Flexibility for Employees: Employees have the flexibility to choose a plan that meets their specific needs and preferences, as opposed to being limited to an employer-selected plan.

Administrative Ease: Unlike traditional group health plans that have varying rates that are negotiated every year and annual renewals, ICHRAs are straightforward with very little administrative work.

ICHRA vs. Traditional Group Health Insurance

Characteristic	ICHRA	Traditional Group Health Plan
Business Size	Any Size (1+ employee)	Any Size (1+ employee)
Employer Contribution	The employer sets a monthly reimbursement amount of their choosing.	Employers pay a percentage of employee premiums each month.
Cost Predictability	Employers reimburse employee expenses up to a set amount.	Monthly premium payments are fixed, but can increase year over year.
Plan Choice for Employees	Employees select their own plan, depending on their needs.	Employees must enroll in a pre-selected plan that the employer chooses.
Compliance	Employee health plans must provide minimum essential coverage.	Plans must comply with ACA, COBRA and ERISA standards.

How to Set Up an ICHRA for Your Business

Determine Your Budget and Reimbursement Limits: Decide on the maximum amount of money you want to reimburse your employees each month. If you have multiple classes of employees (ex. full-time vs. part-time) be sure to highlight the differences in the set amounts.
Create a Detailed Plan Document: Put together a document that includes reimbursement details, eligibility requirements and any other coverage details.
Inform Your Employees: Using this document as a point of reference, inform your team about the ICHRA. Be sure to clearly explain how it functions and how they can enroll, as many people are not familiar with this health plan setup.
Review and Adjust Each Year: Be sure to evaluate your ICHRA each year and make changes (if necessary), depending on budgeting preferences and employee feedback.

FAQs

What are the downsides of an ICHRA?

The main downside of ICHRAs is that there is a possibility that employer reimbursement amounts may not cover the entire cost of employee premiums or other medical expenses. In this particular scenario, employees could be faced with unexpected costs that must be paid out-of-pocket. This is especially possible for employees with a lot of healthcare needs.

What’s the difference between ICHRAs and HSAs?

Health Savings Accounts (HSAs) are tax-advantaged savings accounts that employees can use to pay for qualified medical expenses that fall under the health plan’s deductible. Additionally, HSAs are transferable, meaning employees can keep the funds even if they leave for another job. ICHRAs on the other hand, are non-transferable, and reimbursements can be used for premiums in addition to qualified medical expenses.

Can employees opt out of an ICHRA?

Yes— it’s entirely up to the employer whether or not they want to take advantage of the employer ICHRA. With that said, if they don’t opt in, they aren’t eligible to receive reimbursements for medical costs and premiums if they have their own health insurance plan.

Can employers offer both an ICHRA and a traditional group health plan?

In most cases, employers can only offer one or the other, since ICHRAs are contingent on employees purchasing their own non-employer sponsored health plan. The only time that an employer can offer both is if an ICHRA is offered to one class of employees, while another class of employees is covered by a traditional group health plan.

How does an ICHRA differ from a health stipend?
Health stipends are simply extra money allocated to each employee to be used for any medical costs. Additionally, health stipends are considered taxable income. On the other hand, ICHRAs offer tax-free reimbursements to employees and require proof insurance and claims, to ensure that funds are actually being used for qualified healthcare expenses.

Get Started with an ICHRA Today!

ICHRAs are a great choice for businesses of all sizes looking to provide flexibility to employees, without the complexity that often comes with traditional group health insurance. With so many health options available, you don’t need to settle for a plan that exceeds your budget or requires employees to obtain coverage that doesn’t fit their needs. Instead, consider an ICHRA!

Ready to get an ICHRA for your business? EZ.Insure makes the process quick and easy. Our platform offers access to free quotes, a plan comparison tool, and live assistance from expert insurance agents, so you’ll be sure to get a plan up and running in no time!

To get started, simply enter your ZIP code below, or call us directly at (844)-770-0064.

Small business benefits, also commonly referred to as group benefits, give businesses a way to offer employees quality healthcare and long-term planning perks at an affordable cost. The term “small business” simply refers to EZ.Insure’s specialization in businesses with fewer than 50 employees, but don’t worry— even if your company has 50+ employees, we have access to insurance plans that meet the needs of any business size.

Whether you’re a new company looking to establish your first employer-sponsored health plan, or are simply aiming to enhance your team’s current benefits package, EZ.Insure makes the process quick, easy, and affordable.

Laptop screen displaying "Employee Benefits" with icons representing health, email, calendar, and financial tools, symbolizing small business health insurance and employee benefit options. Text overlay reads "Small Business Benefits Overview" from EZ.Insure

Small Business Health Insurance

Small business health insurance provides essential health coverage to employees of a company. This type of insurance generally costs much less for employees as opposed to an individual plan, as insurance rates tend to go down when larger groups are insured together. These plans are highly customizable for small businesses as they can be tailored to meet a variety of specific needs and budgets. In addition to providing key health benefits to employees, studies show that employers who offer health insurance have an easier time attracting and retaining top industry talent.

Want to learn more? Check out our full, in-depth Small Business Health Insurance Guide.

Small Business Dental Insurance

Dental insurance is an insurance add on that covers all of your routine dental care such as cleanings, X-rays, fillings, and major procedures like crowns or root canals. The great thing about dental insurance is that many plans cover preventive dental care services at 100%, making it easy and affordable to keep your oral hygiene in tip-top shape. Dental insurance is typically purchased as an add-on to health insurance since the Affordable Care Act does not require healthcare plans to cover it. Even so, employers frequently offer both perks in aims to provide a more well-rounded benefits package that covers all of the bases.

Want to learn more? Check out our full, in-depth Small Business Dental Insurance Guide.

Small Business Vision Insurance

Small business vision insurance, is an employee benefit that’s generally added-on to employer-sponsored health insurance and covers a variety of routine eye care services. These services include annual eye exams, prescription lenses, eye contacts, and sometimes even corrective eye procedures like LASIK surgery. Since poor vision is something that can significantly impact job performance and overall well-being, offering it to employees tends to increase overall job satisfaction and employee productivity. Additionally, it generally costs $15 or less per month per employee to offer vision insurance, making it an affordable and appealing complement to a typical health benefits package.

Want to learn more? Check out our full, in-depth Small Business Vision Insurance Guide.

Small Business Life Insurance

A small business life insurance policy is a necessity for anyone with loved ones who depend on them. This type of policy is commonly added on to employee benefits packages and works by providing an employee’s loved ones (beneficiaries) with funds in the case of an unexpected death. There are multiple types of life insurance policies all of which function slightly differently. These include:

Term Life Insurance: Provides coverage for a set number of years only, and pays out a death benefit if the employee passes away during that time.
Permanent Life Insurance: Includes “Whole Life Insurance” and “Universal Life Insurance” and “Final Expense Insurance,” all of which remain in effect for the entirety of your life, and never need to be renewed, as long as you pay your premiums.

Employers can choose to fully cover the cost of employee life insurance, or offer it as a voluntary benefit where employees pay part or all of the premium cost. No matter how it’s set up, small business life insurance provides employees and their families with peace of mind, knowing that they’ll be financially stable in the case of an untimely death.

Want to learn more? Check out our full, in-depth Small Business Life Insurance Guide.

QSHERA (Qualified Small Employer Health Reimbursement Arrangement)

A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) is a health benefit alternative to traditional health care, tailored to businesses with less than 50 full-time equivalent (FTE) employees. Rather than providing a standard group health insurance plan, companies offering QSEHRA can reimburse employees tax-free for their individual health insurance premiums and other qualified medical expenses.

QSEHRAs stands as a flexible, economical alternative to group health plans, allowing small businesses to offer employees important medical benefits without the complexity of traditional coverage.

Want to learn more? Check out our full, in-depth QSEHRA Guide.

ICHRA (Individual Coverage Health Reimbursement Arrangement)

An Individual Coverage Health Reimbursement Arrangement, commonly referred to as an ICHRA, is a benefit funded by employers that reimburses employees for health insurance premiums and qualified medical expenses. Unlike traditional health plans, where employees are limited to one or a few pre-selected coverage options, ICHRAs let workers choose the plan of their choice, and then receive tax-free reimbursements for the plan’s cost.

Want to learn more? Check out our full, in-depth ICHRA Guide.

Level-Funded Plans

A level-funded health plan is one type of employer-sponsored health insurance that offers business owners more flexibility and savings potential compared to traditional, fully-insured health plans. Level-funded plans are created by combining aspects of self-funded and fully-insured health insurance, helping small businesses manage high healthcare costs, while also providing employees with quality benefits.

Unlike traditional health plans, with level-funded plans business owners incur some of the financial risks for claims. On the flip side, level-funded plans present the opportunity for refunds, if claims are lower than expected. Level-funded plans also commonly provide business owners with stop-loss insurance, which helps to pay for claims that are higher than anticipated.

Want to learn more? Check out our full, in-depth Level-Funded Health Plans Guide.

Self-Funded Plans

A self-funded health plan, also known as a self-insured health plan, is a type of employer-sponsored insurance where business owners incur the financial risk of employee health claims. Instead of paying a monthly premium to health insurance companies, with self-funded plans, employers set aside their own money to cover employee medical expenses as they arise.

Unlike level-funded and fully-insured plans which have fixed monthly payments or premiums, with self-funded plans employees only pay for actual employee claims that occur. This presents the opportunity to save funds that are unused at the end of the year, but also could mean paying more out-of-pocket, if claims are higher than expected. Stop-loss insurance is also commonly paired with self-funded plans to help keep out-of-pocket costs in check if claims are higher than expected.

Want to learn more? Check out our full, in-depth Self-Funded Plans Guide.

Fully-Insured Plans

A fully-insured health plan is a traditional employer–sponsored insurance plan, where businesses pay a set monthly premium to an insurance provider who takes full responsibility for all employee medical claims. Fully-insured plans decrease the amount of risk that employers take on, since the insurance company covers all claim payouts, no matter how many total claims are filed.

Fully-insured plans are a great option for small businesses as they offer stability, since monthly premium costs always remain the same. Additionally, they are generally easy to manage and comply with all Affordable Care Act (ACA) regulations, making them a great choice for companies seeking predictable prices, and minimal administrative work.

Want to learn more? Check out our full, in-depth Fully-Insured Health Plans Guide.

Get Small Business Benefits Today with EZ.Insure!

EZ.Insure has all the tools you need to get a small business health insurance plan, or other employee wellness benefits. No matter what your budget and preferences are, we can find a plan that works for you. Our platform offers free, no-obligation quotes, side-by-side plan comparisons and 24/7 access to licensed insurance agents. To get started, simply enter your ZIP code below or give us a call at (844)-770-0064.

If you have more specific questions regarding any of our small business benefits, be sure to check out our Small Business Benefits FAQs section!

HRAs: ICHRA vs QSEHRA

HRAs: ICHRA vs QSEHRA text overlaying image of a clipboard showing ichra and qsehra You’re not the only one who wants to know what the difference is between an ICHRA and a QSEHRA. This is one of the more common questions business owners ask when they’re trying to decide which benefits to offer their employees. Both plans are health reimbursement accounts (HRAs). They make it possible for you, the employer, to give your workers benefits that are both affordable and tailored to their needs. They each let your employees save money exclusively for their health care needs. While ICHRAs and QSEHRAs are similar in what they offer, they work in different ways. Understanding them is the first step in deciding if you’d like to offer one or the other depending on your budget and how you’d like your employee benefits to work.

What are HRAs?

Before we get into these two types of HRAs let’s look at what a standard HRA is. A HRA might be the best way for a small business to help its workers get coverage at a price they can afford. HRAs are not health insurance plans. Instead, they are a way for employers to reimburse their workers for their health care costs that is allowed by the IRS. These are not accounts like HSAs or FSAs. Instead, they are agreements (hence the name), which makes them easier to use than bank accounts.

Employers don’t have to have a pre-funded account for distributing the money, but they can if they want. They keep the money until an employee files a claim for reimbursement. So, if an employee doesn’t ask for reimbursements or doesn’t ask for the full amount, the employer gets the money. On top of that, there are no taxes on the reimbursements!

What Are ICHRAs?

An ICHRA is a tax-free health benefit paid for by an employer that reimburses employees for their qualifying medical costs. With an ICHRA, employers give their workers a tax-free allowance each month to pay for certain medical costs. Employees then buy the health care services and things they want, like individual health insurance coverage, and the company reimburses them up to their allowance amount. Your employees can compare their options for individual coverage on the government health insurance marketplace.

There is no annual limit on how much an employer can contribute, and you can give different classes of workers different allowance amounts. There are two more things to keep in mind. First, employees and their families are only qualified for the ICHRA if they have coverage through a qualifying individual health insurance policy. If the employee or a family member who is part of the individual plan loses benefits, they can no longer get reimbursements.

Second, there are limits on the insurance tax credit in the ICHRA. Specifically, if an employee takes part in the ICHRA, they are no longer qualified for premium tax credits. Because of this, workers are free to opt out of the ICHRA as long as their allowance amount is considered “unaffordable” and wouldn’t provide minimum value under the ACA.

ICHRA Process

Here’s a step by step process for operating an ICHRA.

You set the allowance – The amount of tax-free money you give to an employee for qualified costs is set by you. There can be different amounts for each type of employee. Such as full-time employees, part time employees, seasonal workers, etc. In general, ICHRA allowances for each class of workers should be the same. You can, however, give different allowances within that employee class based on the age of the worker or the size of their family.
Employees receive healthcare – Employees pay for their own health care with their own money. They can buy the health goods and services that are right for them, such as individual health insurance.
Employees submit proof – When an employee has a medical expense, they must show you proof. Such as a receipt or a letter from their insurance company explaining the services they received.
You review – When an employee has a medical cost, they must show you proof. Like a receipt or a letter from their insurance company explaining the services they received.
You reimburse the employee – The company pays back the worker up to the amount of their allowance. Both the business and its workers do not have to pay taxes on these reimbursements, but once the employee’s allowance limit is hit, they can’t get any more reimbursements.

Who Can Offer An ICHRA?

Even though ICHRAs are available to all organizations, a company can’t give both the ICHRA and a QSEHRA. You also can’t offer both an ICHRA and a group health plan to the same group of employees. For example, you could offer full-time employees a traditional group health plan and part-time employees an ICHRA, but you couldn’t give full-time employees an option between the group health plan and the ICHRA; it’s one or the other. ICHRAs are a good choice for businesses with 50 or more workers. Under the ACA’s employer mandate, you must give at least 95% of full-time employees health insurance that meets the minimum necessary coverage. Meaning they include the “10 essential benefits”.

What Is A QSEHRA?

A qualified small employer HRA (QSEHRA) is an official health benefit that has been approved by the IRS. It lets small businesses with fewer than 50 full-time employees pay their workers tax-free for their health insurance premiums and other health-related costs. With a QSEHRA, workers don’t have to sign up for a certain type of health insurance in order to be eligible. This gives them the freedom to choose any insurance plan they want.

Payroll taxes do not have to be paid on any QSEHRA reimbursements by you or your employees. If an employee has health insurance that offers minimum essential coverage (MEC), he or she may not have to pay income tax on reimbursements. Because these reimbursements are not taxed, workers don’t have to count their QSEHRA as income at the end of the year. Unlike traditional group health insurance, the QSEHRA doesn’t have minimum employer contribution limits. This means that you can give this benefit to your employees even if you don’t have a lot of money, but there are limits on how much you can give.

Also, there are no participation requirements to offer a QSEHRA. So you don’t have to have a certain number of workers registered in the benefit in order to offer it. Employers can set monthly budget caps with a QSEHRA, which gives them full control over their costs. Once the limits have been set, they can’t be broken. Also, because a QSEHRA doesn’t need to be pre-funded, costs are only paid out when an employee has a qualifying expense. Any money that isn’t used stays with you.

Who Can Offer a QSEHRA?

For your company to be qualified for the QSEHRA benefit, it must have fewer than 50 full-time employees. According to the Affordable Care Act, if you have 50 or more full-time employees, your company is a large employer. This means you can give an individual coverage HRA (ICHRA), but not a QSEHRA. In addition to having to be a certain size, an eligible employer cannot give a QSEHRA and any other group plan at the same time. If an employer wants a QSEHRA and already has a group health insurance policy, they can cancel it and become qualified.

Which Is Better For My Business?

If you want to use an ICHRA or a QSEHRA, you need to think about a few different things. You should start by thinking about your workers and what they need. Benefits are used by many employers as a way to keep good workers and attract new ones. Your benefits should be as personalized as possible to the people on your team. An ICHRA is likely your best choice if you want a more flexible health benefit. Such as more customization with employee classes, no limits on yearly contributions, or meeting the employer requirement.

But a QSEHRA is the way to go if you want a health benefit that is less expensive than group health insurance, easy to set up and run, and works for qualified small employers with less than 50 workers. No matter which HRA you choose, you’ll be picking a customizable health benefit that will give your workers more control over their own healthcare decisions while saving your company money.

Working With EZ

HRAs are a great way for employers to help their workers’ pay for medical costs they have to pay for on their own. Employers can keep costs down while giving their workers a perk that lets them pay for their own medical care. There are different kinds of HRAs, so most businesses will be able to find one that works for them. This is what makes HRAs so special and why they are becoming more and more popular. We’re also here to help if you need help figuring out the complicated world of insurance.

If you want to learn more about your choices for group insurance, you can get in touch with us at EZ. We’ll put you in touch with a highly trained person who can help you decide if an HRA is right for you and your business. You’ll save time, never have to deal with trouble, and never have to pay for our services. EZ.Insure will put you in touch with a specialized agent for free, so let’s get started! Put your zip code into the box below to get a price right away. Call 877-670-3531 to talk to your own agent.

How To Cancel Your Group Insurance

Despite the fact that health insurance is an important and very popular employee benefit, many small business owners have been canceling their group insurance policies. For some business owners, even the tax credits that are meant to help provide coverage to employees do not offset the price of group insurance enough. For other business owners, the problem might be not enough participation in their group insurance plan, because employees are choosing to purchase individual coverage. We know that this can present a dilemma to many small business owners; after all, you want to make sure that your employees are healthy and happy. Remember you have other options to provide healthcare to your employees. So if you do decide to cancel your group insurance plan, you should first understand what other health benefits you can offer employees, as well as how to cancel your group plan.

Canceling Your Group Health Insurance Plan

The good news is that you can cancel your group health insurance plan if you really need to. Most group health insurance plans are a unilateral contract, meaning that you can cancel your plan at any time during the year. Some carriers require you to provide 30 days notice, but this is not always necessary. Be aware that some insurance carriers have penalties if you do decide to cancel early.

To get a better understanding of your carrier’s cancellation process, take a look at your contract; in fact, it is always a good idea to be fully aware of this information before you sign up for any plan. To get the cancellation process started, you will need to call a customer representative at your insurance company. Once you’ve spoken with a representative, you will usually need to confirm your cancellation in writing, either by letter or fax; some companies will even accept an email. Be sure to confirm exactly what you need to do to cancel your coverage so you will not be billed for the following month.

While you have every right to cancel your group insurance benefits, you should be aware that, under the Affordable Care Act, you are required to give employees at least 60 days advance notice prior to the cancellation date. This will allow them to take advantage of their 60-day Special Enrollment Period and choose a new insurance plan.

Signing Up For A HRA

HRA written on a paper with a stethoscope and black highlighter next to it — *You can offer your employees other benefits, such as a HRA, and choose from different kinds that would benefit you and them more.*

Even if you choose to cancel your traditional group health plan, you still have other options for helping your employees pay for healthcare. For example, you can choose to offer them a Health Reimbursement Arrangement (HRA). HRAs have been growing in popularity among employers because of their flexibility and lower costs when compared with traditional group healthcare. With these arrangements, you give employees a set monthly amount to spend on their own health insurance policy. Your employees have the option to use this allowance to buy their own individual health insurance plan and get reimbursed for qualified health insurance premiums up to the amount of their reimbursement allowance. The are a few different types of HRAs to choose from, including:

QSEHRAs (Qualified Small Employer HRAs) are for businesses that have fewer than 50 employees. In order for employees to receive the tax-free reimbursement, they must have an individual health plan and submit a claim. With a QSEHRA, you can choose the monthly reimbursement amount, but you must offer the same amount to all employees, and there are set limits on how much you can reimburse them each month.

ICHRAs (Individual Coverage HRAs) are for businesses of any size. With these arrangements, you can create “classes” of employees, such as part-time or full-time, and offer them different monthly reimbursement amounts. With an ICHRA you can offer as much money as you would like; there is no limit on monthly reimbursement amounts.

ICHRAs are especially popular because you can customize them to meet your company’s needs. You can choose any monthly reimbursement amount, as well as whether to reimburse your employees for premiums only or premiums and qualified medical expenses. You can also choose whether to structure reimbursement the same for all employees or to vary the amount by family size.

Keeping Your Employees Notified

As mentioned above, you will have to notify your employees once you decide you are going to cancel your group insurance policy. If you choose to offer your employees a HRA instead, make sure to keep your employees in the loop about this as well. This is especially important if you decide to offer a QSEHRA, as they will need to have their own individual health plan to participate. Your employees might feel like they are “losing” healthcare if you switch from a traditional group plan to a HRA, so make sure to thoroughly explain the HRA that you chose and its benefits. There will also be new rules for them to get used to.

If you choose to switch to a HRA, explain to your employees:

How the HRA works
The benefits of a HRA, such as more flexibility
How to request reimbursement

Need Help?

If you’re looking to save some money and are ready to ditch your group health insurance plan, the first thing you should do is come to EZ.Insure. We will provide you with your own agent who will assess your business’ needs, and suggest ways to offer your employees the best health benefits possible without breaking the bank. When you use EZ.Insure, you will save time, money, and the headaches that come from trying to research and compare all the different plans out there. EZ understands how important it is to save money, which is why we will instantly compare all available plans in your area for free. To start saving, simply enter your zip code in the bar above, or to speak directly to an agent, call 888-998-2027.

Sole Proprietor Participation in HRAs

Employers who have trouble providing their employees with a traditional group health insurance plan sometimes turn to health reimbursement arrangements (HRAs) to help. HRAs are not health insurance, they are employer-funded accounts approved by the IRS that help employees pay for qualified out-of-pocket medical expenses. They can also help pay for their individual health insurance plan’s premiums. HRAs work through a reimbursement system. Employers offer employees a monthly allowance of tax-free money that they can use to pay for healthcare services, including health insurance, and then the employer reimburses them up to their allowance amount. But what if you’re a sole proprietor? You can offer this arrangement to any employees you have, but can you participate in the savings from an HRA yourself? In short, generally no, but there is a way you might be able to!

HRA Rules

Offering an HRA is a great way to help pay for your employees’ healthcare costs; these arrangements give you more control over how much you’re spending, and can help to lower your healthcare costs. HRAs only need to be funded when employees who participate in them incur expenses, and not all employees who participate will incur expenses up to the limit established by the employer. Any unused funds in the HRA stay with you, the employer.

There are also tax advantages to HRAs: any reimbursements made to your employees are tax deductible for you and tax-free for your employees. HRAs are only available to:

Current and former employees, and their spouses.
Covered tax dependents.
Children who will not be 27 years old by the end of the tax year.
Unfortunately the IRS does not separate you and your business, which makes you ineligible to participate in an HRA.

Sole Proprietorship

As a sole proprietor, according to the IRS, there is no separation between you and your business. The Internal Revenue Code Section (IRC) 401(c) determines that owners who are self-employed individuals are not considered employees. This makes them ineligible to participate in a HRA. Ineligible owners include partners, sole proprietors, and more-than-2% shareholders in a Subchapter S corporation.

However…

If you are married and your spouse is listed as a W-2 employee at your business, then there is a way for you to get a HRA, and enjoy all of its tax benefits. To work around the rule set by the IRS, you can set up a HRA in your spouse’s name and list yourself as a dependent of your spouse. However, this will only work if you don’t hire any other W-2 employees who would be eligible for either an ICHRA, QSEHRA or a One-Person 105 HRA. What you can do is:

Hire your spouse as a W-2 employee, and make their salary the amount you want to reimburse through the HRA.
Make your spouse the primary policy holder on your family health insurance plan.
Become a dependent on your spouse’s health insurance plan.
Set up a One-Person 105 HRA, ICHRA, or QSEHRA for your spouse. Consider:
- The One-Person 105 option if you have medical expenses or other employees that are excludable under the rules.
- A QSEHRA if your health expenses are less than the reimbursement limit under the QSEHRA rules.
- An ICHRA if the reimbursement limit of a QSEHRA is too restrictive, since there are no limits on ICHRA contributions.
Save all of your medical bills so your company can reimburse them each month from a separate account.

Get Help

To make sure that you are following the rules laid out by the IRS properly, it would be wise to speak with an insurance agent. EZ’s agents are highly trained and knowledgeable in the group health insurance industry, and can help you determine if participating in an HRA is possible for you. To find out if you are eligible, and to compare plans in your area for free, enter your ZIP code in the bar above, or to speak directly to an agent, call 888-998-2027.

Tag: ICHRA

Jump to:

What Is an ICHRA?

How Does an ICHRA Work?

Who Qualifies for an ICHRA?

How Much Can Employers Contribute to an ICHRA?

What Medical Expenses Can an ICHRA Cover?

What Are the Benefits of Offering an ICHRA?

ICHRA vs. Traditional Group Health Insurance

How to Set Up an ICHRA for Your Business

FAQs

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What Is an ICHRA?

How Does an ICHRA Work?