IRS Issues Final Regulations on new HRAs

On October 12, 2017, the Trump Administration issued Executive Order 13813, promoting Healthcare Choice and Competition across the United States. The administration was going to focus on improving the usability of Health Reimbursement Arrangements (HRAs), to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with non group coverage.

Please click here to read OCA’s white paper on the proposed HRA regulations. This article was written by our legal counsel, Alston & Bird, LLP earlier this year. 

Individual Coverage HRA

The ICHRA allows employers of all sizes that do not offer a group coverage plan to fund an HRA for employees to buy individual-market insurance, including insurance purchased on the public exchanges formed under the Affordable Care Act (ACA).

Currently, qualified small-employer HRAs (QSHRAs) that were created by Congress in December 2016, allow small business with less than 50 full-time employees (FTEs) to use pretax dollars to reimburse employees who buy non-group health coverage. This ICHRA rule goes even further and doesn’t cap employer contributions. As a result, employers with less than 50 FTEs will have two choices – a QSEHRA or an ICHRA – with some regulatory differences between the two.

The departments posted an FAQ on the new rule that includes a model ICHRA employee notice and attestation form that complies with the new rule’s disclosure provision and aims to explain the type of HRA being offered and communicate that individuals may become ineligible for a premium or tax subsidy when participating in an ACA exchange-based plan.

If employers choose to offer this new ICHRA benefit in 2020, they will need to take action before then, including the required notice for eligible participants. Employees who want to take advantage of an ICHRA in the new year must enroll in an individual health plan during the open enrollment period (unless they have Medicare) that runs between November 1 and December 15, 2019.

Extended Benefit HRA

The Extended Benefit HRA will increase flexibility for employer-sponsored insurance. It can be offered in addition to a traditional group health plan to permit employers to finance up to $1,800 (pre-tax) of additional medical care (such as copays, deductibles, premiums for vision, dental, COBRA and short-term insurance coverage), even if the employee has declined enrollment in the traditional group health plan.

The final rule can be read in detail here