HRAs and healthcare ministry sharing programs

Soaring health insurance expenses have led both employers and individuals to search for more cost-effective coverage options. Employers might consider implementing health reimbursement arrangements (HRAs), while employees may opt for healthcare sharing ministry programs. What if that type of plan covers your employee? Can you still support them with an HRA?

In this article, we'll go over how HRAs and healthcare sharing ministries work as well as what guidelines are in place for using them together.

In this blog post, you'll learn the following:

• How HRAs and healthcare sharing ministries can help reduce health insurance costs.
• Whether healthcare sharing programs qualify for HRA reimbursements and what limitations apply.
• How health stipends provide an affordable approach to healthcare.

What is a health reimbursement arrangement (HRA)?

An HRA is an employer-funded health benefit. Employers can reimburse employees tax-free for more than 200 types of out-of-pocket medical care expenses. Depending on the type of HRA you offer, this can include their individual health insurance premiums.

Some other examples of HRA-eligible expenses include:

• Preventive care services
• Emergency medical services
• Urgent care services
• Prescription drugs
• Over-the-counter medication

A stand-alone HRA serves as an affordable alternative to a traditional group health insurance plan. But, some HRAs, like the group coverage HRA (GCHRA) and the excepted benefit HRA (EBHRA) can pair with group health plans.

With an HRA, employers have complete cost predictability without minimum participation requirements. They simply set an allowance amount and reimburse employees up to that limit. Plus, stand-alone HRAs allow employees to purchase medical insurance that fits their needs instead of getting stuck with a one-size-fits-all group plan.

Two of the most popular stand-alone HRAs are:

• The individual coverage HRA (ICHRA): The ICHRA provides the most flexibility for employers. There's no limit on employer contributions, so you can offer as much as you'd like as an allowance. You can also differ allowances using 11 employee classes, such as seasonal employees and full-time employees. However, eligible employees need their own individual health insurance plans that meet minimum essential coverage (MEC) guidelines to participate.
• The qualified small employer HRA (QSEHRA): The QSEHRA is only for small businesses with fewer than 50 full-time equivalent employees (FTEs). It's an excellent choice for those who are offering health benefits for the first time or want to enhance their current benefit offerings. The QSEHRA isn't as flexible as the ICHRA. It has annual contribution limits, and you can only vary allowances by family size and status, not employee classes. However, unlike the ICHRA, eligible employees only need plans with MEC to participate in the QSERHA. That means your employees with Medicaid, CHIP, or health insurance coverage through a parent’s or spouse’s group plan can take part in the benefit.

What is a healthcare sharing ministry program?

Healthcare sharing ministries are cost-sharing programs or private healthcare systems (PHCS) set up as faith-based, not-for-profit organizations. Members share religious beliefs and values and use these as a cornerstone for their medical expense distributions.

According to the Affordable Care Act (ACA), a healthcare sharing ministry needs to meet the following requirements:

• It must be a 501(c)(3) organization.
• It must have members who share common ethical or religious beliefs.
• It must not discriminate membership based on state of residence or employment.
• It can't discontinue membership due to the development of a medical condition.
• It must have existed and been in practice continually since December 31, 1999 (a grandfather clause).
• It must be subject to an annual audit by an independent CPA, which must be made publicly available upon request.

Members of healthcare sharing ministries contribute a fixed dollar amount each month to their own savings accounts. When a member of the community is ill and needs help to pay their medical care expenses, the person submits a request for the amount needed to cover the bill.

If an appointed individual or committee approves it, they pay the expense directly to the healthcare provider using funds from members' savings accounts.

As with traditional health insurance policies, there's usually a set amount that each family (or individual) has to pay before submitting requests to the program for assistance. This amount can range from about $500 to $10,000.

Members are part of a preferred provider organization (PPO), which means they receive pre-negotiated rates when they use providers in that network. If a member uses a non-PPO physician or facility, they may have to pay higher out-of-network prices or even shoulder the entire bill.

Some of the largest healthcare sharing ministries are:

• Christian Healthcare Ministries
• Zion HealthShare
• OneShare Health
• Solidarity HealthShare
• Medi-Share
• Samaritan Ministries
• Liberty HealthShare
• United Refuah HealthShare
• MCS Medical Cost Sharing
• Altrua HealthShare
• Freedom HealthShare
• Trinity HealthShare Inc

Can an HRA reimburse healthcare sharing ministry membership donations?

Under Internal Revenue Service (IRS) guidelines, employers can't reimburse healthcare sharing ministries' membership fees with an HRA. This is due to U.S. Code 26 § 213, which outlines which eligible expenses and medical insurance premiums are eligible for HRA reimbursement.

Insurance companies don’t offer healthcare sharing ministry programs, and they aren’t ACA compliant. Instead, these plans are exempt from the ACA. This means the federal government doesn’t legally consider the benefit insurance with MEC. Because of this, membership fees and donations aren't reimbursable according to federal requirements.

Can you still offer an HRA to employees in a healthcare sharing ministry program?

Because healthcare sharing ministries don’t qualify as MEC, they don’t satisfy the participation requirements for a QSEHRA or ICHRA. This means that an employee who is part of a healthcare sharing ministry needs to secure other quality coverage to participate in an HRA.

To take part in a QSEHRA, employees need health coverage with MEC. To participate in an ICHRA, employees need a qualifying individual health plan with MEC. So, a ministry membership by itself won’t work with an HRA. However, employees could enroll in a qualifying individual health plan with MEC to gain access to their HRA.

However, because an HRA can’t reimburse healthcare sharing ministry program fees, employees may not see much value in getting double coverage. Employees might feel burdened by the additional complexity of obtaining a qualifying plan to access their HRA. Thankfully, there’s another option for providing health benefits to these employees.

Can you offer a health stipend to employees in a healthcare sharing ministry program?

You can't reimburse healthcare sharing ministry fees with an HRA, but you can help pay for them with a health stipend. This is another alternative to health insurance coverage. A health stipend is additional money added to your employees' paychecks to help them cover their healthcare needs.

This can include:

• Medical insurance premiums
• Dental and vision insurance premiums
• Primary care services
• Maternity care
• Annual physical examinations

Since a health stipend isn't a formal health benefit, there are fewer restrictions on how you can use it. However, unlike HRAs, health stipends are taxable. They also don't satisfy the ACA’s employer mandate for applicable large employers (ALEs).

A stipend is best for small organizations with fewer than 50 FTEs that want to provide benefits to employees with sharing ministries. It’s also an excellent option for organizations with employees who receive premium tax credits for their Marketplace plans, as a stipend doesn’t affect their eligibility for the credit.

Conclusion

Both HRAs and healthcare ministry sharing programs offer a unique and flexible alternative to traditional group health insurance plans, which makes them attractive to nonprofit organizations. However, offering the two benefits together is likely not financially feasible for employees.

If you’re interested in offering a budget-friendly health benefit that suits both you and your employees, PeopleKeep can help! Our HRA and health stipend administration software makes it easy to set up and manage your health benefits in just a few minutes each month. Schedule a call with one of our HRA specialists to learn more.

1. 26 U.S. Code § 213