Navigating Health Reimbursement Arrangements (HRAs) for Small Businesses

For small businesses, providing comprehensive employee healthcare isn't just a legal requirement. 

It's also the key to attracting top-notch talent, optimizing employee retention, and improving productivity in the workplace. 

This leads us to Health Reimbursement Arrangements (HRAs) — a health plan that has been on the rise, especially after the One Big Beautiful Bill Act (OBBBA) of 2025. 

In this post, we'll take a look at HRAs, why they're gaining popularity, how they work, and tips to implement them successfully for small businesses. 

But before we go any further, a quick introduction.

What are HRAs?

HRAs pertain to account-based health plans wherein employers provide a monthly budget to cover employees' out-of-pocket medical expenses and, in most cases, health insurance premiums. 

There are different types of HRAs suited to the needs of small businesses, namely;

• Individual Coverage Health Reimbursement Arrangement (ICHRA) 
• Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
• Excepted Benefit Health Reimbursement Arrangement (EBHRA)
• Group Coverage Health Reimbursement Arrangement (GCHRA) 

Each HRA type comes with unique features, benefits, and disadvantages. And as Medicaid cuts, tighter regulations, and more frequent reverifications transform the health insurance landscape, HRAs are steadily becoming the go-to option for small businesses and early-stage startups.

Benefits of HRAs for Small Businesses

Here's a quick look at the advantages of choosing an HRA for your business: 

• Cost control — All types of HRAs allow employers to set monthly reimbursement allowances to cover their employees' healthcare needs. Some HRAs are capped by maximum contribution limits, while ICHRA has none to enable complete budget control.
• Flexibility — QSEHRA and ICHRA, in particular, provide employees with a high degree of flexibility and freedom when it comes to how they spend their monthly reimbursement allowances. They can choose their own health insurance plans, pay for the specific medical services they need, fund their Health Savings Accounts (HSAs), and more. 
• Tax benefits — For employers, monthly ICHRA contributions are tax-deductible as business expenses. Approved reimbursements to employees are also non-taxable, ensuring employees get the full amount they need. 
• Better employee satisfaction — With the right approach, an HRA can do a better job at keeping employees energized, healthy, and motivated to contribute to your startup's growth. It's all about learning their needs and providing them with sufficient training on making the most out of their benefits. 

While certain types of HRAs have unique advantages over others, HRAs are generally seen as less risky and more flexible for employers than other healthcare options. 

To make the best choice for your business, it's crucial for you to understand what makes each HRA different. 

Types of HRAs

Without further ado, here's a closer look at the different HRA types that work great for small businesses:

1. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

QSEHRA is a type of HRA designed for small businesses with fewer than 50 full-time employees. It allows employers to set monthly reimbursement allowances for qualified medical expenses, including individual health insurance premiums. 

Some of the defining characteristics of QSEHRA are: 

• Annual contribution caps set by the IRS ($6,350 for individuals and $12,800 for families)
• Uniform allowances for all enrolled employees (no customizations per employee class)
• Employees can choose the medical services and insurance products they need

These features streamline the administration of QSEHRA plans for small businesses. However, they also add restrictions to what otherwise would've been a highly flexible and infinitely scalable healthcare solution. 

2. Individual Coverage Health Reimbursement Arrangement (ICHRA)

ICHRA is a newer HRA type that addresses some of the limitations of QSEHRA.

For starters, it is available to businesses regardless of size — whether you have only one or hundreds of employees in need of healthcare. 

ICHRA also doesn't have annual contribution limits, enabling companies to offer coverage options that can match a wide range of healthcare needs. And, unlike QSEHRA, your ICHRA strategy can include different reimbursement plans per employee group or class. 

3. Excepted Benefit Health Reimbursement Arrangement (EBHRA)

EBHRA, short for Excepted Benefit Health Reimbursement Arrangement, does exactly what it says on the tin. 

It is a type of HRA that specifically offers reimbursements for excepted health benefits, like vision care, dental, short-term limited duration insurance, and other qualifying medical expenses. 

Although EBHRA funds cannot be used for health insurance premiums, it is designed to complement healthcare coverage plans like employer-sponsored group plans, HSAs, and even other HRAs. 

4. Group Coverage Health Reimbursement Arrangement (GCHRA)

GCHRA is a type of HRA designed for businesses that offer a group health insurance plan. 

It borrows elements of flexibility from ICHRA, like no contribution limits and HSA compatibility. However, it cannot be used to pay for individual health insurance premiums. 

Instead, everything about GCHRA is meant to complement existing employer-sponsored group health plans by providing coverage for out-of-pocket medical expenses, like prescription costs, co-pays, and deductibles. 

How to Implement an HRA for Small Businesses

Ultimately, each HRA type comes with its own set of pros and cons. 

Your goal is to pick the healthcare plan that aligns with your business objectives, employee needs, and budget.

Here's a step-by-step strategy that will help you achieve this:

1. Start With Your Business Needs

A successful small business healthcare strategy begins and ends with your employees.

You need to ask questions like, what are your workforce's demographics? What are their healthcare needs?

Furthermore, does your company have (or has access to) the resources to implement the ideal healthcare plan?

At this point, you can still go with non-HRA health insurance alternatives, like Association Health Plans (AHPs) and level-funded health plans. These plans may come with a few advantages, like comprehensive coverage and managed administration by third-party insurers, in exchange for flexibility and cost control. 

2. Decide Your HRA Type

If you're determined to adopt an HRA for your business, the next step is to decide which type to use. 

EBHRA and GCHRA are useful if you have an existing, employer-sponsored health plan. Both can augment plans by providing additional coverage, with GCHRA specifically designed for group health plans. 

QSEHRA and ICHRA, on the other hand, are ideal for providing flexible and predictable healthcare reimbursement allowances for small businesses without group plans. 

ICHRA, however, is the better choice if you're after total control and predictability of costs. 

Without annual contribution limits and employer size requirements, you have complete freedom to create a healthcare plan tailored to your workforce. 

3. Set Your Budget

After deciding your HRA type, the next step is to set your monthly reimbursement budget.

Don't forget that your goal here is to strike the balance between employee needs and your company's financial stability. 

Start by assessing your financial capacity, evaluating factors like cash flow, revenue, and — if applicable — the costs of existing benefits. Then, calculate the costs of your employees' healthcare needs, including health insurance premiums and common out-of-pocket medical expenses. 

Be sure to factor in the tax advantages of HRAs when defining your reimbursement allowances. Remember, HRA contributions are tax-deductible while reimbursements are tax-free.

If your financial capacity and employee healthcare needs don't align, consider building your initial plan around high-priority medical expenses first. Communication with employees is key here, which leads to the next step.

4. Communicate With Employees

Employee communication and collaboration are important elements of HRAs — before and after implementation. 

During the planning stage, give employees the opportunity to voice their health concerns and needs, especially while performing work-related duties. This ensures you set adequate reimbursement allowances that will keep them healthy and motivated in the workplace. 

After launching your HRA, communication should revolve around educating employees about their benefits. This should include the eligible medical expenses covered by your HRA and the tools they need to request reimbursements. 

Effective communication should also persist while your HRA is ongoing. This is to ensure employees are satisfied and confident with their coverage. 

5. Launch, Monitor, and Adjust

With your HRA up and running, your focus should shift into tracking and optimizing your strategy based on a handful of metrics, like:

• Participation rate — The percentage of eligible employees who are actually enrolled in your HRA. A lower participation rate may indicate problems in terms of communication, plan structure, and the sufficiency of reimbursement allowances. 
• Utilization rate — The portion of HRA funds that are actually used for employee reimbursements. Tracking your utilization rate will help fine-tune your reimbursement allowances for maximum efficiency.
• Administrative costs — The direct costs of managing your HRA. Depending on your setup, this may include platform subscriptions and third-party administrator fees. 
• Employee retention rate — Believe it or not, employee health benefits have a direct impact on employee retention. Monitoring employee retention rate over time, especially after implementing your HRA, is a great way to gauge its effectiveness through the lens of your workforce.  

Tracking these metrics is your gateway to making sharper, data-driven decisions on employee healthcare. At the same time, stay open to employee feedback to identify improvement opportunities that the numbers don't tell you. 

For example, when running an ICHRA plan, employees may find it challenging to pick an individual health insurance plan on their own. 

With platforms like SimplyHRA, you can streamline the insurance plan selection process by providing recommendations that are compatible with your ICHRA plan. 

As a software solution specifically designed for ICHRA, SimplyHRA also comes equipped with an AI chatbot that can accelerate employee training. It can answer HRA-related questions, provide reimbursement status updates, share instructions on plan management tasks, and more.

Common HRA Challenges 

Apart from employee training, here are other common challenges associated with implementing an HRA for small businesses:

• Regulatory compliance — Navigating IRS and Affordable Care Act (ACA) rules can prove to be a significant roadblock when it comes to adopting HRAs. The challenge includes drafting plan documents that outline essential information for compliance, such as written privacy procedures, eligibility requirements, reimbursement claims procedure, plan administrators, and other provisions for federal acts (e.g., the Health Insurance Portability and Accountability Act and Employee Retirement Income Security Act). 
• Administrative burden — As a self-funded plan, employers are primarily responsible for administrative tasks like verifying medical receipts and reviewing reimbursement requests. Thankfully, this can be offset by working with a third-party HRA administrator or choosing a managed software solution.
• Budget constraints — HRA types with annual contribution limits (e.g., QSEHRA and EBHRA), might be insufficient to cover all of the healthcare needs of your employees. This can be addressed by combining your limited HRA with other health benefits or choosing a model without contribution limits (i.e., ICHRA).

Another challenging aspect of HRAs is choosing a Third-Party Administrator (TPA) or administration platform. 

Remember, your choice will have a direct impact on the costs, dependability, and effectiveness of your HRA plan. It also affects how you can overcome challenges like regulatory compliance, managing reimbursements, and setting your budget.

Top HRA Administration Platforms

The good news is, you don't have to start from scratch when researching HRA administration solutions.

Below, we compiled the top four HRA solutions that will streamline adoption and implementation for small businesses:

1. SimplyHRA

HRA Types: ICHRA

Price: $59 per month + $29 per month for each additional employee

Key Features: 

• Intuitive visual interface
• Done-for-you compliance and paperwork
• Built-in AI chat assistant
• Desktop and mobile app versions

Developed specifically for ICHRA, SimplyHRA consolidates everything you need into a single intuitive platform. It allows you to create multiple plans for different employee groups, onboard members, manage reimbursements, and track analytics — all in one dashboard.

Click here to schedule a personalized demo.

2. Take Command

HRA Types: ICHRA and QSEHRA

Price: $40-$100 platform fee, $20-$40 per additional employee (small vs large employers)

Key Features:

• HRA Hub platform designed for customizability
• Managed employee onboarding assistance
• AutoPay tool for automating monthly insurance premiums

Take Command is a trusted QSEHRA + ICHRA administration solution that can deliver a custom-designed HRA management portal. The company also offers managed services for onboarding employees and completing compliance requirements — handing off HRA reports to your accounting department or payroll specialist each month.  

3. StretchDollar

HRA Types: ICHRA

Price: $40 per month + $8 per month for each employee

Key Features: 

• Hands-off management
• Automatic payments for premium reimbursements
• Simple setup

StretchDollar is an ICHRA administration service that makes the process as streamlined and painless as possible. 

After a few minutes of setup (including specifying your budget), the rest will be handled by the StretchDollar team. They will be in charge of all the heavy lifting, including reimbursement management and compliance.

4. PeopleKeep

HRA Types: ICHRA, QSEHRA, and GCHRA

Pricing: $35 base fee + $19 per month for each employee

Key Features:

• Design your own benefits
• Auto-generated plan documents 
• Expedited employee onboarding

PeopleKeep is another well-known HRA administration software, which supports three of the top HRA types: ICHRA, QSEHRA, and GCHRA. The platform is designed to turn several hours of HRA administration into a few minutes of navigating a visual dashboard, which includes analytics reports and a detailed reimbursement tracker. 

5. Solution

HRA Types: EBHRA, GCHRA, QSEHRA, and ICHRA

Pricing: $14 per employee per month (ICHRA and QSEHRA) or $5 per employee per months (EBHRA and GCHRA)

Key Features:

• Managed compliance and plan documentation
• Expense validation via web portal and mobile app
• Direct payments to individual and group insurers

Salusion is a lightweight HRA administration software with basic features for all HRA types. In addition to automating tasks related to compliance and plan documentation, the platform also helps with expense verification, reimbursement approvals, and reporting through a clean app interface.

Conclusion

Conducting research is the first step to implementing a successful HRA plan for your small business. 

You need to be familiar with the different HRA types, their unique advantages, and the necessary steps for implementation. More importantly, you need to find the ideal HRA administration solution that matches your needs. 

SimplyHRA is an all-in-one ICHRA management software with modern features that streamline everything — from employee onboarding to analytics tracking. 

See it in action by booking a demo here.