HRAs in 2020 and beyond…

Individual Coverage HRAs

Health reimbursement arrangements (HRAs) are tax-advantaged accounts that are funded with employer dollars to pay employee expenses not covered by their health plan. The employer outlines what expenses will be covered in the HRA summary plan document within the limitations outlined by the Internal Revenue Service Publication 969. For example, an HRA could pay all eligible medical expenses, or the HRA could be limited to cover only dental or vision expenses. Although an HRA can have an option to carry forward unused funds to the future or for retirement, an employee cannot take their HRA funds to a new employer. HRAs can vary greatly in design, but are developed basically for the same purpose; to reimburse employees tax-free for expenses not covered by the employer’s health plan.

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. Through this Executive Order, beginning January 1st, 2020 employers may not offer two new (QSEHRA began 1/1/17) HRA options.  


The ICHRA allows employers of all sizes to reimburse their employees (tax-free) for medical expenses. Employees may use ICHRA funds to pay for individual healthcare premiums and eligible out-of-pocket medical expenses they or their dependents may incur during the plan year.

2. Excepted HRA Benefit

The Extended Benefit HRA can be offered in addition to a traditional group health plan to permit employers to reimburse up to $1,800 (pre-tax) of additional medical care (such as copays, deductibles, premiums for vision, dental, COBRA and short-term insurance coverage).


A Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) allows employers with fewer than 50 full-time-equivalent (FTE) employees to reimburse their workers for premiums for health insurance purchased on the individual market as well as qualified medical expenses. 

Individual Coverage HRA Coming 2020

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. 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. 


What We Can Do


Full Service Administration

  • Automate Employee Reimbursement (ClaimsExpress)
  • Provide Plan Document and SPD
  • Conduct 105(h) Non- Discrimination Testing
  • PCORI Fee Reporting
  • Online/Mobile Access

Integrated Debit Card

  • Single-Source Card for HRA/FSA/Commuter/HSA
  • Separate cards (if requested) for each benefit
  • Pay a set copay for Office Visits/Prescriptions
  • Pay a percentage for Prescriptions
  • Auto-resolve card transactions

Complex HRA Plan Design

  • Non-Embedded/Embedded Deductibles
  • Differentiated Co-pays Reimbursement
  • Defined Copay Reimbursement
  • Doughnut hole Reimbursement
  • Percentage Payouts
  • Variable Employee/Employer Responsibility

Are your employee’s tired of submitting claims for reimbursement?

OCA’s ClaimsExpress™ automates the employee claim filing experience by linking to your insurance carrier portal! Once the accounts are linked, ClaimsExpress™ will automatically retrieve any new EOBs issued by the insurance company. This can significantly reduce or even eliminate the need to file paperwork to get reimbursed from your HRA benefit.

Frequently Asked Questions

HRAs can vary greatly in design, dollar amount, and services. Employers should be fully aware of all the complexities that the HRA has to offer. Should your questions not be answered here, please contact OCA directly.

I am an employer. To whom can I offer an Individual Coverage HRA (ICHRA)?

If you offer an ICHRA, you must offer it on the same terms to all individuals within a class of employees. You cannot offer an ICHRA to any employee to whom you offer a traditional group health plan. However, you can decide to offer an ICHRA to certain classes of employees and a traditional group heal plan (or no coverage) to other classes of employees.

Is there a minimum "Class Size" that applies when offering an ICHRA?

Yes, a minimum class size rule applies if you offer a traditional group health plan to some employees and an ICHRA to other employees.  The minimum class size will vary based on the size of the employer. The class size is: Ten employees, for an employer with fewer than 100 employees, ten percent of the total number of employees for an employer with 100 to 200 employees, and twenty employees for an employer with more than 200 employees. 

Can owners or partners participate in an HRA?

No. According to IRS guidelines, anyone with two-percent or more ownership in a schedule S corporation, LLC, LLP, PC, sole proprietorship, or partnership may not participate. C-corporation owners and their families are eligible to participate in HRA plans because they are considered to be W-2 common law employees.

What is the tax benefit for me as an employer?

Employers can deduct the amount of their contributions. Since the account is funded on a “notional” basis like a line of credit, the employer can take the deduction only when the amounts are actually paid out.

What are the different classes based off of in an ICHRA?

Employers may make distinctions, using classes based on the following status: Full-time employees, Part-time employees, Employees working in the same geographic location, Seasonal employees, Salaried workers, Non-salaried workers (such as hourly workers), or any group of employees formed by combining two or more of these classes.

How do my employer contributions work?

Employers can contribute as little or as much as they want to an ICHRA. However, an employer must offer the HRA on the same terms to all employees in a class of employees, except that employers can increase the amount available under an ICHRA based on the employee’s age or number of dependents

Is there a tax benefit for my employees?

Yes. HRA funds are contributed to employees on a pre-tax basis; therefore, disbursements are not included when calculating taxable income. For this reason, employees can not claim an income tax deduction for an expense that has been reimbursed under the HRA.

Do employers have to contribute the same amount to every employee’s HRA?

Yes, according to Federal regulations, employer contributions must be comparable, that is they must be in the same dollar amount for all employees with the same category of coverage. You can vary the level of contributions for full-time vs. part-time employees. There may be other variations around comparability. Consult your tax advisor for additional information.

Still have questions?

Ready to Make a Change?

We’d love the opportunity to showcase how we can help with your commuter benefits program!