Tax-Smart* Options to Reduce Out of Pocket Medical Expenses:
Exploring HRAs, ICHRAs and Executive Medical Reimbursement Plans
As a small business owner, you need the proper support to meet the ongoing demands of running your business—and that includes healthcare coverage. But company medical plans are designed to be one-size-fits-all, leaving your unique needs (and those of your family and top talent) unmet. What choices do you have to enhance your healthcare benefits? Let’s explore.
What Are HRAs?
Health Reimbursement Arrangements or HRAs are employer-funded arrangements that reimburse employees for qualified medical expenses, such as copays, deductibles, and prescriptions. They’re pretty straightforward: you set a fixed contribution amount, and employees use the funds to cover out of pocket medical expenses.
However, HRAs come with significant limitations. Nondiscrimination rules require you to contribute the same amount to all eligible employees, regardless of their role. This means you can’t provide additional benefits to yourself or key employees without extending the same benefit to every employee. And while HRAs are deemed a tax-efficient solution, they are an “arrangement” and lack the power of insurance coverage.
What Are ICHRAs?
Individual coverage health reimbursement arrangement or ICHRAs, introduced in 2020, provide more flexibility than traditional HRAs. They allow employers to reimburse employees for individual health insurance premiums and other qualified out of pocket medical expenses. Unlike HRAs, ICHRAs let you segment employees into classes (e.g., full-time vs. part-time) and offer different contribution levels to each group.
While you can offer an ICHRA and group health insurance at the same time, you can't offer the same employees both. To use an ICHRA, employees must be enrolled in individual health insurance coverage.
While ICHRAs solve some HRA challenges, they still focus primarily on insurance premiums and don’t provide the robust coverage that many small business owners need. Additionally, ICHRAs aren’t designed to prioritize benefits for business owners or their leadership teams.
What Are Executive Medical Reimbursement Plans?
Add-on executive medical reimbursement plans, like ExecuCare, stand apart by offering a solution tailored specifically to the needs of small business owners and their mission-critical employees. Supplemental to the company medical plan, ExecuCare offers reimbursement for out of pocket medical costs as well dental, vision, mental health services, advanced preventive services and the rarely covered wellness treatments. With tax-deductible monthly premiums and non-taxable reimbursements, these supplemental executive medical reimbursement plans are a tax-smart way to fund personal healthcare expenses.*
Unlike HRAs and ICHRAs, executive medical reimbursement insurance plans are not subject to nondiscrimination rules, giving you the flexibility to design benefits for yourself and other key talent without having to break the bank by extending the same offerings to all employees. Executive medical reimbursement plans can ebb and flow with your life and health stage needs over time, providing personalized value.
The Bottom Line
If you’re feeling boxed in by a company one-size-fits-all medical plan, it’s time to consider layering on a more flexible and robust solution. HRAs and ICHRAs may fall short if you’re seeking tailored support. Fully insured executive medical reimbursement plans, like ExecuCare, deliver the supplemental coverage, flexibility and control needed to take care of yourself, your family and your mission-critical leaders in a tax-smart way.* Explore ExecuCare’s robust add-on insurance coverage here.
*This is not local, state or federal tax advice as each person and each company is unique. It is recommended that you seek the independent counsel of a professional tax adviser.