Beyond benefits: Health Reimbursement Arrangements

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by Toni-Anne Barry

Offering competitive employee benefits is essential for employers to attract talented job seekers, but it can be tough for small businesses. With rising health care costs, health insurance is one of the top benefits that employees are on the lookout for and having an insurance plan can be the difference between someone accepting a job or staying on the market. Supplying full insurance plans, however, isn’t feasible for many small businesses, especially businesses with fewer than 20 employees. This is a growing concern for employers and employees alike, but a new rule issued by the Trump administration seeks to fix this issue. The rule will allow employers to contribute to their employees’ health care costs through Health Reimbursement Arrangements (HRAs) without having to provide full plans.

HRAs are employer-funded accounts that help cover the cost of individually purchased plans within the Affordable Care Act market. Before this rule was instituted, HRAs were only able to cover out-of-pocket expenses. But now, employers can support and encourage their employees to enroll in health insurance plans by providing tax-sheltered funds for their HRA that can be directly used to pay their monthly premiums. The administration estimates that up to 800,000 employers will offer reimbursement arrangements to more than 11 million American workers once the rule goes into effect on Jan. 1, 2020.

AAHOA Vice Chairman Biran Patel had the distinct honor of attending the White House Rose Garden ceremony as President Trump unveiled the new HRA rule. Biran said, “The competitive labor market and the labor shortage affecting our industry mean that hoteliers must be more creative in assembling benefit packages to attract and retain employees. HRAs are yet another tool we can use to ensure our employees have access to affordable health care, and that allows us to remain competitive in the benefits we offer.”

For hoteliers who don’t currently offer insurance plans to their employees, HRAs could be a great way to contribute to the costs of employees’ health care in a more manageable way. Not only is it an added benefit for individuals who previously did not have an insurance plan at all, but employees who had access to only one plan can now pick an insurance plan that is best suited for them if their employer opts to use HRAs. Under this structure, employees will have greater discretion across the board when it comes to their medical coverage, and all small business owners can strengthen their business by offering such an appealing benefit to their staff.

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