A benefits package is a crucial factor for employees when considering a job offer. As a business owner, you’re charged with providing employer benefits that can attract and retain top talent. Take a look at your current benefits plan. Are you providing the most advantageous healthcare options? Have you explored other ways to maximize the value of your employee benefits?
Over the past four years, alternative benefit strategies have been rapidly explored and adapted, according to the HRA Council’s annual report. Due to increasing healthcare costs, inflation, and the rising cost of living, employers and benefits professionals are continually seeking alternative strategies to attract and retain employees.
Pairing employer benefits is one such strategy. Health Reimbursement Arrangements (HRA), specifically the Individual Coverage Health Reimbursement Arrangement (ICHRA), are considered a group health plan that allows for pairing with other tax-free plans, such as Health Savings Accounts (HSAs), which are bank accounts specifically designed for qualified health expenses. HSAs enable employees to deposit, grow, and withdraw funds tax-free for qualified medical expenses.
Depending on how an ICHRA plan is setup, these arrangements can complement or conflict with HSAs. When aligned effectively, ICHRAs and HSAs create an ideal synergy that promotes consumer choice and engagement in healthcare decisions. Employees must choose an HSA-qualified ACA plan to utilize their HSA.
Studies indicate that individuals tend to engage more deeply in healthcare decisions when they have control over their financial choices. This dual offering (ICHRA and HSA) lets your employees make informed healthcare decisions while providing valuable long-term savings, as well as significant tax advantages. Employers can further enhance this synergy by contributing to employees’ HSA accounts, further incentivizing them to choose plans that offer both immediate and long-term benefits.
Portability, Flexibility, and Security
One of the key advantages of pairing a Health Savings Account with an Individual Coverage Health Reimbursement Arrangement is the portability of both the HSA and the individual health insurance policy. Unlike an ICHRA, an HSA is a bank account that belongs to the employee, not the employer.
If an employee accepts a position with another company offering an ICHRA, they can keep both their individual ACA health insurance policy and their HSA account, allowing them to avoid restarting their deductibles mid-year. If the employee leaves their job or switches health plans, they still own and have access to their HSA account. This means they can continue to use it for qualified medical expenses or save it for the future.
Integrating an HSA with an ICHRA provides employees with added flexibility, security, and assures them they can use their HSA funds for healthcare expenses even if their job or health plan changes. This combination of benefits enhances stability for employees leading to increased job satisfaction and retention.
It’s important to note that there are two ICHRA configurations to consider: premium-only ICHRAs and ICHRA plus qualified out-of-pocket medical expenses. While premium-only ICHRAs align seamlessly with HSAs, allowing tax-free contributions without hindrance, ICHRAs that permit reimbursement of 213-d expenses pose a risk of disqualifying HSA contributions during the ICHRA coverage period. Exceptions to this rule exist, such as limited-purpose ICHRAs and Post-Deductible ICHRAs, which offer flexibility and additional benefits, albeit with some coordination requirements.
Employer Benefits Experts
At Flyte HCM, we recognize the complexities of ICHRAs and HSAs. Our user-friendly technology, combined with personalized customer service, allows you to easily manage these benefits all in one place. By partnering with us, you can maximize the advantages of your healthcare program while reducing compliance issues and safeguarding your employees’ financial future. Let’s work together to unlock the full potential of your ICHRAs and HSAs.
