Things are changing fast in how we work. More and more companies are using hybrid models, hiring contractors or part-timers, and really valuing flexibility. It’s become pretty clear that the old way of offering healthcare benefits – one plan for everyone – just isn’t cutting it anymore. That’s where Health Reimbursement Arrangements (HRAs) are coming in. They’re a smart way forward, giving businesses a more affordable option while letting employees choose what works best for them.
HRA options such as Benepass’s HRA solution allow businesses to reimburse employees for qualified medical expenses on a tax-free basis, and are quickly gaining traction among small businesses, startups, and even large corporations looking for more adaptive benefits strategies. With various HRA types tailored to different workforce needs, this tool is becoming a cornerstone of modern benefits planning.
The Shift Toward Customizable Benefits
Workforces today are more diverse than ever before—not just in demographics, but in work styles and employment types. Employers may have a mix of full-time staff, part-time employees, freelancers, and remote workers scattered across multiple states. Providing a single group health plan that accommodates all those variables is not only expensive but often ineffective.
HRAs provide a smarter alternative. Instead of offering a rigid, pre-selected insurance plan, employers allocate a fixed monthly allowance for employees to spend on healthcare costs. Depending on the HRA type, this might include premiums for individual insurance plans, out-of-pocket medical costs, prescriptions, dental, vision, and more. This puts the power of choice directly into employees’ hands while allowing employers to maintain control over budget and benefits structure.
Types of HRAs: Something for Everyone
The flexibility of HRAs comes largely from the fact that they aren’t one singular product—they come in different types, each designed to serve different organizational needs. A few key types include:
- Individual Coverage HRA (ICHRA): Reimburses employees for individual health insurance premiums and other qualified expenses. Perfect for companies that want to move away from traditional group plans but still offer meaningful support.
- Qualified Small Employer HRA (QSEHRA): Tailored for small businesses with fewer than 50 employees. Offers a simple, tax-free way to reimburse workers for health costs, with annual contribution limits.
- Excepted Benefit HRA (EBHRA): Available to employees who are already offered group health insurance. This type can be used to reimburse out-of-pocket costs and premiums for dental or vision insurance.
This range of options means companies can mix and match or shift strategies as their workforce evolves—something traditional insurance models don’t easily allow for.
Cost Control Without Compromising Value
One of the most appealing features of HRAs is cost predictability. Employers choose how much to contribute per employee, per month. This eliminates the uncertainty and rising premiums associated with conventional group plans, while still giving employees access to quality coverage that fits their personal needs.
For small businesses or startups with tight budgets, QSEHRAs provide a compliant and affordable way to offer health benefits. Meanwhile, ICHRAs can scale with your business, supporting teams across different states or employment categories.
In addition, since HRA funds are tax-deductible for the employer and tax-free for the employee, they create significant financial efficiencies on both sides.
Ideal for Freelancers, Part-Time Workers, and Remote Teams
Another advantage of HRAs is their ability to bridge the benefits gap for non-traditional workers. In the past, contract workers, freelancers, or part-time staff were often left out of employer-sponsored health benefits entirely. With the rise of flexible employment models, this exclusion creates friction for companies trying to attract and retain top talent.
HRAs offer a middle ground. While some employers may not offer full insurance coverage to all worker types, they can still provide a fixed reimbursement through an HRA, improving access to care and building goodwill with their extended teams.
For example, a digital marketing agency with part-time social media managers, freelance designers, and full-time project leads might use ICHRAs to reimburse individual premiums for everyone on the team—without needing a one-size-fits-all plan. This also allows workers in different states or markets to select plans tailored to their local offerings.
Administrative Simplicity With Modern Tech Platforms
HRAs used to come with administrative complexity, but those days are largely gone. A growing number of HRA administration platforms now automate everything from employee onboarding to claim processing and compliance reporting. Employers set allowances and rules through an easy-to-use dashboard, while employees can upload receipts or link insurance policies via mobile apps.
This low-lift setup is especially useful for lean HR teams or business owners who don’t have the bandwidth to manage traditional benefits.
Regulatory Compliance and Transparency
HRAs are governed by IRS and ACA regulations, ensuring they’re legally sound and standardized across industries. While employers do need to comply with notice requirements and plan documents, third-party administrators make this process straightforward. Additionally, because HRA plans are transparent and pre-budgeted, they eliminate the unpredictability that can cause friction between HR teams and employees during open enrollment.
A Strategic Advantage in Today’s Hiring Market
Offering flexible, employee-centered benefits like HRAs can help businesses stand out in competitive hiring markets. Candidates—especially millennials and Gen Z—are increasingly interested in personalized benefits, autonomy in healthcare decisions, and support that extends beyond traditional job perks.
HRAs let companies say, “We support your health, and we trust you to choose what works best for you.” That’s a message that resonates strongly with today’s workforce.
Modern Benefits for Modern Workforces
Health Reimbursement Arrangements offer a compelling answer to many of the challenges modern employers face. They’re customizable, cost-efficient, legally compliant, and easily administered. More importantly, they give employees real choice and autonomy in their healthcare—a feature that’s fast becoming a baseline expectation.
As workforce structures continue to evolve, HRAs represent not just a workaround to high group insurance costs, but a strategic asset for building inclusive, scalable, and attractive employee benefits.
