2 New HRAs and How They Benefit Employers and Employees

July 11, 2019

The Department of Labor (DOL), the Department of Health and Human Services (HHS) and the Treasury Department issued a final rule last month on previously proposed Health Reimbursement Arrangement (HRA) regulations. The final rule lets employers offer two new types of HRAs. We’ve compiled information on each of the new HRAs to help you better understand what’s available for you to offer beginning in 2020. And download the Breaking Down Health Reimbursement Arrangements handout to see a more detailed side-by-side comparison of them.

Two new HRAs in 2020 

What are the new HRAs?

The new rule allows for two new types of HRAs:

  • An Individual Coverage HRA (ICHRA) is available to employees who have individual health insurance (as long as certain conditions are met). And, while the employer provides funds for health insurance coverage, the individual health insurance would still be owned by the employee.
  • An Excepted Benefit HRA (EBHRA) 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).

What is the ruling’s impact?

The final rule gives employers increased flexibility in helping their employees pay for their healthcare expenses. An estimated 800,000 employers will offer individual health insurance premium reimbursement HRAs to more than 11 million employees and family members as a result of the ruling.

How do the new HRAs stack up?

Health Reimbursement Arrangements are customizable, so there are many ways you can build an HRA to suit the needs of your business and your employees. To illustrate what ICHRAs and EBHRAs provide, take a look at how they compare with Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs):

 

ICHRA

EBHRA

QSEHRA

Employer eligibility

Available to businesses that don’t offer employees a choice between the ICHRA and group health insurance; an ICHRA can’t be offered to employees who are already offered an EBHRA.

Available to businesses that offer coverage under a group health plan sponsored by the employer; an EBHRA can’t be offered to employees who are already offered an ICHRA.

Available to businesses that don’t offer group health insurance and have fewer than 50 full-time employees.

Employee eligibility

Employees who have individual health insurance.

All similarly situated employees, whether or not they enroll in the employer’s group health plan.

Full-time employees are automatically eligible; businesses can choose to extend eligibility to part-time employees.

Group health insurance integration

Businesses can offer group health insurance, but not to the same class of employees offered the ICHRA.

Not required to be integrated.

Businesses can’t offer group health, dental or vision insurance.

Annual allowance limits

Set by the employer.

No more than $1,800 (indexed after 2020) can be newly available to each participant for each plan year.

2019 single: $5,150

2019 family: $10,450

 

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Please note: Discovery Benefits cannot provide legal, investment or financial advice related to the plans we administer and nothing shared in this blog post should be interpreted as such. We encourage you to seek appropriate professional advice regarding your plan.

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