See How Proposed HRA Expansion Regulations Would Impact You

October 29, 2018

Health Reimbursement Arrangements (HRAs) are flexible options for you and your employees to save money when they have healthcare-related expenses. HRAs let you, as an employer, contribute tax-free dollars to an account for your employees, helping control healthcare expenses. That’s why HRA popularity is on the rise, with the number of HRAs expected to increase more than 50 percent from 2017 to 2020.

Healthcare remains top of mind for politicians, too. Just last week, three federal government agencies released proposed regulations that, if finalized, would make these accounts more accessible and expand the ability of employees to spend their funds within the customizable plans. Here’s a quick breakdown.

HRA regulation changes proposed

What are the proposed HRA changes?

The Department of Labor (DOL), Treasury Department and the Department of Health and Human Services (HHS) announced the proposed regulations, which would allow for two new types of HRAs:

  • An individual health insurance premium reimbursement HRA (if certain conditions, including non-discrimination, are met). And, while the employer would provide funds for health insurance coverage, the individual health insurance would still be owned by the employee.
  • An excepted benefit HRA that generally allows up to $1,800 per year (plus carryover amounts) to be set aside for the reimbursement of out-of-pocket medical expenses along with premiums for excepted benefit coverage that includes dental and vision coverage, COBRA premiums, and short term limited duration insurance (but excluding individual health insurance premiums) as long as the employee is eligible to participate in a group health plan.

The proposal is in response to regulations within the Affordable Care Act (ACA), which was signed into law in 2010. The ACA placed a number of limits on the use of HRAs, such as preventing employers from integrating their accounts with individual health coverage. The new regulations would roll back some of the ACA regulations and allow accounts to be integrated with and reimburse individual health insurance premiums.

What’s the potential impact?

Roughly 800,000 employers are expected to provide HRAs to over 10 million employees to pay for individual health insurance coverage, according to preliminary estimates from the Treasury Department. The estimates would be reached once employers and employees have fully adjusted to the new regulations.

What’s next?

The IRS will accept comments concerning the proposed regulations until December 28, 2018. The comments are taken into consideration when finalizing the proposed regulations.

Once finalized, the regulations would go into effect for plan years beginning on or after January 1, 2020.

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