The qualified small employer health reimbursement arrangement (QSEHRA), also called a small business HRA, comes with annual contribution limits. In practical terms, that means small businesses are limited in how much tax-free money they can offer their employees through the benefit.

Every year, the IRS outlines these annual contribution limits through a revenue procedure. 

In 2020, small businesses may offer up to $5,250 per self-only employee and up to $10,600 per employee with a family.

Health reimbursement arrangements (HRAs) are becoming increasingly common as more employers are seeking an alternative to traditional health benefits. Employees that are newly offered an HRA through their employer can be confused about how an HRA works. They might be used to another type of health benefit, like traditional group health insurance. This could even be the first time they’ve been offered a benefit by an employer. 

Employee retention is top-of-mind for nearly every organization, and it’s easy to see why—losing employees can mean losing valuable institutional knowledge, lower morale in remaining team members, and lost productivity.

The number of health reimbursement arrangements (HRAs) currently available to employers will grow in January 2020. With all the options on the market, employers considering an HRA need to be well informed.

The cost of health care isn’t just something impacting individuals and their families—it also affects businesses that want to prioritize employee health benefits.

Small businesses are the most vulnerable to these costs. Over the past 15 years, the per-employee cost for employers providing group health insurance increased nearly 200 percent—from around $2,200 to about $6,440.

The high costs of traditional group benefits, matched only by their inconvenience and inflexibility, have prompted many small businesses to forgo offering health benefits altogether. In the current climate, this isn’t a great strategy: because unemployment rates are the lowest they’ve been in 50 years, small businesses face a competitive battle for talent in which the right health benefit is a crucial component for success.

The good news is, starting in 2020, there will be more health benefit options for small businesses than ever.