You can start by learning about the health reimbursement system if you are looking for a policy to reimburse clinical expenses. These arrangements allow business owners to reimburse their employees for certified clinical expenses and medical insurance on a non-taxable basis. Two types of HRAs allow employers to reimburse employees for qualified clinical expenses tax-free. You’ll learn everything you need to know about HRAs for businesses.
The context of reimbursement policies for medical expenses
Local business owners used to use tax-free reimbursement for clinical expenses. The Affordable Treatment Act (also called Obamacare) was passed in 2010 and also had the unintentional result of preventing tax-free reimbursement for small business. A key issue was the analysis that said any business that paid for medical insurance, including specifics, was practically a group strategy. The ACA states that team strategies are required to provide free precautionary treatment. Companies that paid for specific strategies but did not meet the requirements of precautionary treatment would be fined $100 per day, per employee.
Congress focused on the “Obamacare” issue, which was hotly debated. However, little action was taken to help resolve the problem. The Internal Revenue Service began to enforce the rules and fines in late 2015.
Late in 2016, President Obama signed into law the bipartisan 21st Century Cures Act, which opened up the door for health reimbursement setups for small companies. Three years later, updates to the governing guidelines allowed this treatment to be used by businesses of all sizes and with greater adaptability.
The HRA makes reimbursement of clinical expenses possible
QSEHRA – a Certified Small Company HRA – allows small companies to set aside a fixed amount of money each month that employees can use to purchase specific medical insurance, or to pay for clinical expenses. This is tax free. The benefit is that companies can offer benefits in a tax efficient way, without the hassle or stress of a traditional team plan. Employees could also select the strategy they want. It is important to remember that each worker must be compensated at the same level. The QSEHRA was developed to help companies with fewer than 50 employees pay for medical costs as well as other expenses if their strategy allows.
ICHRA, a Specific Security HRA, is a new “taste” HRA that allows companies of all sizes to reimburse any amount monthly on a non-taxable basis for medical expenses sustained by employees at any time of the year. This HRA has a unique feature: workers can be divided into a variety of categories, such as per hour, wage, or even by location, and be reimbursed at different levels. The ICHRA can be used by any kind of business. The amount of repayment that a business can offer is not limited.
What are the policies for reimbursement of clinical expenses?
The companies have great flexibility in terms of what they repay. Understanding the impact of these options can help the business achieve their goals as well as maintain their budget in check.
- Only Reimburse Qualified Costs: Companies may limit reimbursements to only qualified costs. Typically, the reimbursements are for medical insurance premiums, but they can also include qualified dental costs, vision expenses, etc., as long as there is a health insurance plan that meets minimum requirements.
- Reimburse Medical Costs as well as Insurance Premiums: Most companies choose to reimburse clinical costs. Remember: Employers can choose to exclude certain expenses (e.g. “prescriptions”), as long as they are applied to everyone.
What counts as clinical expenses? Here’s a comprehensive checklist!
Have questions about the reimbursement strategy for clinical expenses?
We hope we’ve been able to shed some light on the choices you have. You can find a lot of excellent resources at our disposal, including frequently asked questions pages for ICHRA as well as QSEHRA. You can also contact one of our HRA experts online.
Keely is a mother of four, a better half of one and also a mommy. She has also been involved in individual finance blog writing as well as social media monitoring. She also contributed to MetroFamily magazine. She holds a B.S. Keely has a B.S. Keely can be found with her nose buried in a book or visiting a local restaurant with her family.
Take Command, a Dallas technology startup, aims to improve the medical system by starting with medical insurance. We are HRA geeks who help companies pay for medical insurance using HRAs.
