{"id":19727,"date":"2022-10-28T11:20:35","date_gmt":"2022-10-28T11:20:35","guid":{"rendered":"https:\/\/www.shrm.org\/resourcesandtools\/hr-topics\/benefits\/pages\/employers-consider-hra-based-alternatives-to-group-health-plans.aspx"},"modified":"2022-10-28T11:20:35","modified_gmt":"2022-10-28T11:20:35","slug":"employers-consider-hra-based-alternatives-to-group-health-plans","status":"publish","type":"post","link":"https:\/\/squarehr.com\/index.php\/2022\/10\/28\/employers-consider-hra-based-alternatives-to-group-health-plans\/","title":{"rendered":"Employers Consider HRA-Based Alternatives to Group Health Plans"},"content":{"rendered":"

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Newer models of health reimbursement arrangements (HRAs), such as the qualified small employer HRA (QSEHRA), established in 2017, and the individual coverage HRA (ICHRA), established in 2020, continue to generate interest as alternatives to group health coverage, especially among small and midsize employers.<\/p>\n

As with other HRAs, QSEHRAs and ICHRAs are funded solely by employers with no employee contributions permitted. But unlike traditional HRAs, employees can use QSEHRAs and ICHRAs to pay premiums for nongroup health coverage they purchase for themselves and their families on an Affordable Care Act (ACA) marketplace exchange.<\/p>\n

There is growing interest in these accounts, sometimes referred to as “defined contribution health care,” as a way for employers to keep their health care spending at a fixed dollar amount, new research shows.<\/p>\n

While the percentage of employers that have adopted these approaches remains in low single digits, more employers say they’re open to considering them, according to a report by the HRA Council, a trade organization for HRA administrators, carriers, enrollment firms and practitioners.<\/p>\n

The HRA Council’s report, Growth Trends for ICHRA and QSEHRA 2020 to 2022<\/em><\/a>, based on aggregate client data from council members, shows that 92 percent of employers offering HRA-based individual coverage have 20 or fewer employees. Up to 85 percent of small and midsize clients served by council members did not offer health coverage to their employees until they were able to offer an ICHRA or QSEHRA.<\/p>\n

QSEHRAs and ICHRAs are a popular solution “to cover more Americans with affordable, quality health insurance,” said Robin Paoli, executive director of the HRA Council. “Employees are empowered to choose the coverage they want from respected regional and national insurers, and employers are empowered to offer predictable, cost-effective benefits with fewer administrative burdens.”<\/p>\n

The number of large employers switching to ICHRAs, in particular, has been “growing exponentially,” albeit from a small base, said Jack Hooper, chairman of the board for the HRA Council and CEO and founder of Take Command, an HRA platform firm. “Small and medium-sized businesses are leading the charge to deliver much-needed innovation in the benefits space,” as they look to provide choice for employees and cost control and flexibility for employers, he said.<\/p>\n\n\n\n
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ICHRAs and QSEHRAs<\/strong><\/p>\n

With ICHRAs\u2014pronounced “IK’-rahs”\u2014employers with 50 or more full-time or equivalent employees, and thus subject to Affordable Care Act (ACA) coverage requirements, can opt to pay for employees to purchase their own health insurance coverage on the ACA marketplace or through an insurance broker, rather than providing an employer-sponsored group health plan.<\/p>\n

When these employers use ICHRAs rather than a traditional group health plan to fund employee health care, their funding must be sufficient for employees to purchase a plan that meets the ACA’s coverage and affordability requirements<\/a>.<\/p>\n

QSEHRAs\u2014pronounced “kyoo-SEHR’-ahs”\u2014allow employers with fewer than 50 employees to use pretax dollars to reimburse employees who buy nongroup health coverage. The rules for ICHRAs and QSEHRAS differ<\/a>. For instance, QSEHRAs have an annual cap<\/a> on employer payments and reimbursements, while ICHRAs do not.<\/p>\n

Another difference is that QSEHRAs allow employees to qualify for both their employer’s subsidy and the difference between that amount and any ACA marketplace premium tax credit for which they’re eligible. If an ICHRA is deemed affordable, however, employees must choose the ICHRA over a premium tax credit.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Budget-Friendly Benefits<\/p>\n

ICHRAs, in particular, are extending benefits to traditionally difficult-to-insure groups, like part-time and seasonal workers, the council reported.<\/p>\n

The report also showed that:<\/p>\n