At first glance, it may appear that the only difference between Health Reimbursement Arrangements (HRAs) and Qualified Small Employer HRAs (QSEHRAs) is the three letters placed before HRA.
However, these benefits have significant differences that affect what employers are eligible to sponsor them and their interaction with other insurance plans.
I’ll break it down for you here.
What size employers are eligible to sponsor the benefit?
- HRA: All employers are eligible to sponsor an HRA for their employees.
- QSEHRA: Only non-applicable large employers (ALEs) are eligible to sponsor a QSEHRA. This number includes employees of all commonly controlled group members, including brother-sister or parent-subsidiary entities.
Can the employer sponsor other group health coverage?
- HRA: Yes. In fact, to meet several requirements under the ACA, an HRA must be integrated with other group health coverage. HRAs may be integrated with Medicare and Tricare coverage if certain conditions are met, however, HRAs cannot be integrated with individual health coverage.
- QSEHRA: No. The employer, and any commonly controlled group members, must not offer any other group health plan to their employees.
How does the benefit affect health savings account (HSA) eligibility?
- HRA: Even if the participant is enrolled in a high deductible health plan (HDHP), a general-purpose, first-dollar HRA will constitute impermissible coverage and prevent HSA eligibility. An HRA can be designed to be HSA compatible by either making it a limited scope benefit (ex. dental or vision expenses only) or making it post-deductible.
- QSEHRA: Even if the participant is enrolled in a HDHP, a general-purpose QSEHRA will constitute impermissible coverage and prevent HSA eligibility. QSEHRAs cannot be post-deductible, so the only way to make them HSA compatible is by making them a limited scope benefit.