Employers are allowed to use HRAs to reimburse employees tax free for personal health insurance premiums, similar to the way employers contribute on a tax free basis to group premiums. This has been clarified with the release of numerous U.S. Treasury and State publications explicitly spelling out how employers can use HRAs for tax-free reimbursement of the premiums paid for personal health insurance policies. See IRS Publication 969.

Why can't an employer just pay directly for an employee's personal policy premium without an HRA?

Federal regulations prohibit employers from paying directly for employee's medical expenses, including health insurance premiums, outside of an HRA or other ERISA-qualified group health benefits plan (e.g. Section 125). ZaneHRA automatically makes employers HIPAA and ERISA compliant with these regulations.

What is the difference between group and individual health insurance?

Individual and group health insurance policies differ in terms of cost, coverage, and portability. In 45 states, individual policies are subject to medical underwriting, which makes them much less expensive than group policies for healthy individuals.

Are individual insurance policies available in all states?

Individual insurance policies are available in every state. However, state regulations have removed some price benefits of individual policies in Connecticut, Massachusetts, New Jersey, New York, and Vermont. Using a group insurance plan with ZaneHRA may provide the best employer option in these states. Your broker or benefits advisor will provide you with recommendations on how to balance regulations, locations, and budgets to create the optimal health benefits program for employees you have in these states.

What types of expenses are allowed for reimbursement through a
defined contribution health plan?

A defined contribution plan may reimburse any expense considered to be a qualified medical expense by the IRS, including premiums for personal health insurance policies. Within the IRS rules, employers using ZaneHRA may restrict the list of reimbursable expenses in any way they choose. For more information, see IRS Publication 502.

How can I minimize my exposure?

ZaneHRA’s reporting features make real-time monitoring of liabilities, reimbursements and utilization easy. Employers can change plan benefits at any time, or cancel the entire plan at any time. Further, the ZaneHRA solutions allow employers to establish plan-year maximum reimbursements for any given category of expense (e.g., dental) and to establish a maximum balance that any participant class may hold at a time.

Is there a contribution limit (as there is for Health Savings Accounts?)

No. There is no limit to the amount of money an employer can contribute to an employee’s defined contribution health plan.

Is there a minimum or maximum number of participants that must enroll
in a defined contribution health plan?

No. Federal regulations do not stipulate a minimum or maximum number of participants. ZaneHRA serves clients of all sizes and can administer a defined contribution plan for a company of any size.

Can I roll balances from year to year?

Yes. Balances may roll forward from year to year. Employers can prevent balances from rolling over; however, doing so defeats one of the ZaneHRA’s advantages. Employers may not pay out unused balances to any employee in cash or other benefits.

What if an employee's claim exceeds his/her balance?

ZaneHRA platform tracks and carries-forward unpaid balances until adequate funds have been accumulated. If an eligible expense will exceed an employee’s balance, the employee may submit the claim immediately instead of waiting until sufficient funds accumulate. The approved claim is paid off as allowances accrue. Employees will continue to receive partial reimbursements until the entire claim has been reimbursed.

Where do employers keep the accumulated balances? Do they send the
money to a third party or set up a separate account?

Defined contribution plans are notional arrangements; no funds are expensed until reimbursements are paid. With a ZaneHRA solution, employers reimburse employees directly only after the employees incur approved medical expenses. It is recommended that employers pay reimbursements out of the employer’s general funds (e.g., general purpose bank account) via direct deposit, payroll or check. The liability is tracked in real-time on the employer’s ZaneHRA plan website.

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