Does a Business Need to Sponsor Health Insurance to Benefit from an HRA?

When it comes to Health Reimbursement Arrangements, not all employers are required to sponsor a group health plan in order to provide their employees with a custom health benefits package and save the business valuable tax dollars.  

A Health Reimbursement Arrangement (HRA) is a tool for business owners to increase their tax savings and to offer tax-free health benefits.  An HRA may reimburse for qualified medical expenses such as co-pays, deductibles, and qualified health insurance premiums.

Do employers need to sponsor a group health plan in order to provide an HRA?  IT DEPENDS ON THE HRA.  One HRA requires the employer to sponsor a group health plan, while another HRA requires the employees to show proof of Minimum Essential Coverage (MEC) through either their spouse or the Marketplace in order to participate. 

If a business has one or more employees and sponsors a group underwritten health plan, the Integrated HRA can help reduce a business’ overall costs of insurance coverage by 10-50%.  This means savings for the employers and more options to pay for medical expenses not covered by health insurance for their employees.

The BASE® Integrated HRA is designed to reduce the overall group health insurance cost for the business and it’s employees.  Coupled with the group health plan, the HRA can help to suppress the yearly increases most commonly associated with health care.

If a business wants to reimburse either individual health premiums, non-insured medical expenses, or both, and have employees who meet MEC, not offered through the employer, the Section 105, Individual Coverage, QSE, or Excepted Benefit HRA, can help the business save money by not having to provide a traditional group health plan making all reimbursements a deductible business expense, and still help employees pay for their medical expenses tax-free.

The BASE® Section 105 HRA is designed to assist with health care expenses, and provide an average of $5,000 in tax savings per year.  Small business owners can deduct up to 100% of health care costs as a business deduction.  In order to participate, small business owners must be classified as either a Sole Proprietor, in a Partnership, a C Corporation, or S Corporation.

The BASE® Individual Coverage HRA is designed to streamline benefit options and cut costs without reducing value. New in 2020, this new plan will integrate with the employees’ individual health insurance to provide business owners with a great alternative when it comes to providing health benefits.

The BASE® QSE HRA is designed to help employers offer a more attractive benefits package.  Employers are able to provide a tax-preferred benefit that employees can use to pay for qualified health care expenses, such as their health insurance premiums purchased on or off the Marketplace.

The BASE® Excepted Benefit HRA is designed to provide employees with an additional $1,800 to pay for out-of-pocket medical expenses and non-insured medical expenses.  The business can provide a group health plan with this HRA, but the employee does not have to participate in the employer-sponsored health plan in order to participate.  This new plan for 2020 provides a way to maximize tax benefits for a business and their employees.

Health Reimbursement Arrangements have been proven to reduce the financial impact of health care expenses for both the employer and employees.  Please call 888-386-9680 or visit the website for more information.  

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