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.
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:
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:
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:
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:
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.
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.
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:
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.
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.
This article was originally published on June 25, 2013. It was last updated January 23, 2025.