An employer benefits package can be a determining factor for employees when accepting a job. Are you offering the most beneficial healthcare options? Are you exploring ways to maximize the value of your employer benefits program?
Individual Coverage Health Reimbursement Arrangements (ICHRAs) and Health Savings Accounts (HSAs) may be the answer you are looking for. Understanding how these benefits work together and how to design them effectively can unlock a wide range of advantages for both you and your employees.
The Best Employer Benefits Come in Pairs
Pairing an HSA with an HSA-Qualified health plan can provide significant tax savings for your employees, while also reducing your payroll liabilities and healthcare costs. HSAs offer a triple tax advantage, allowing employees to deposit, grow, and withdraw funds tax-free for qualified medical expenses. However, the paired health plan must expose your employees to a minimum level of out-of-pocket costs to qualify for these benefits. Depending on how an ICHRA plan treats expense reimbursements, these arrangements can complement or clash with HSAs. When aligned effectively, ICHRAs and HSAs offer an ideal synergy, promoting consumer choice and engagement in healthcare decisions. Studies show that when individuals control their monetary choices, they tend to engage more deeply in healthcare decisions.
The paired offering allows your employees to make informed healthcare decisions while providing them with valuable long-term savings and tax advantages. You can further enhance this synergy by contributing to your employees’ HSA accounts, incentivizing them to choose plans that offer both immediate and long-term benefits.
Portability, Flexibility and Security
One of the most significant advantages of pairing an HSA with an ICHRA is the portability of the HSA account and their individual health insurance policy. Unlike an ICHRA plan, an HSA is a medical bank account owned by the employee, not the employer. Suppose the employee accepts a position with another company that offers an ICHRA or a QSERA. In that case, they would also keep their individual health insurance policy and would not need to start their deductibles over mid-year.
If the employee leaves their job or changes health plans, they can take their HSA account with them and continue to use it to pay for qualified medical expenses. By integrating an HSA with your ICHRA plan, you provide your employees with added flexibility and security, knowing that they can continue using their HSA funds to pay for healthcare expenses even if their employment or health plan changes. This benefit combination can provide a sense of stability for your employees, leading to increased satisfaction and retention.
It is important to note that there are two ICHRA configurations to consider: premium-only ICHRAs and premium reimbursement plus the 213-d 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 danger zone for HSA contributions, potentially disqualifying them 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 understand the intricate dynamics of ICHRAs and HSAs. Our intuitive technology, coupled with personalized customer service, ensures that you can navigate these benefits seamlessly on one platform. By partnering with us, you can maximize the benefits of your healthcare program while minimizing compliance conflicts and securing your employees’ financial future. Let’s unlock the full potential of your ICHRAs and HSAs together.
