New regulations have been released expanding the ways in which HRAs can be used to provide health benefits to employees.
Understanding the different HRA Options
Health coverage is a focus for many employers as they look for innovative and cost-effective ways to provide benefits. New regulations have been released expanding the ways in which HRAs can be used to provide health benefits to employees. Traditionally, HRAs have always been required to integrate with a group health plan. However, regulators now allow for several options for employer-funded, tax deductible plans that may provide pre-tax aid to employees towards their costs for healthcare.
Individual Coverage HRAs (ICHRA)
Employers of any size can establish an HRA that reimburses the employee’s premiums for major medical insurance purchased in the individual market, as well as other Code §213(d) medical expenses. ICHRAs are not subject to statutory limits on the benefit amount that can be provided.
Qualified Small Employer HRA (QSEHRA)
While similar to ICHRAs, QSEHRAs are available only to small employers that are not subject to health care reform’s employer shared responsibility provisions— i.e., employers that do not have 50 or more full-time employees, including full-time-equivalent employees, during the preceding year.
Excepted Benefit HRA (EBHRA)
The Excepted Benefit HRA can be offered in addition to a traditional group health insurance plan and permits you 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 for employees who have declined enrollment in a traditional group health insurance plan.
Understanding the Different HRA Types
We’ve provided a helpful chart that illustrates some of the key differences between the various HRAs that are available, including the two additional HRA types that are available for plan years beginning on or after January 1, 2020.View Chart
|Group Health Plan Requirements||Can’t be offered with a group health policy||Can be offered with a group health policy, but employees cannot have a choice between the group policy and the HRA.||Must be eligible for group health benefits|
|Eligible Expenses||Individual coverage premiums and out-of-pocket medical expenses (pre-tax group health plan premiums are reimbursed after-tax)||Individual coverage premiums, Medicare-related premiums, and out-of-pocket medical expenses (no group health plan premiums)||Out-of-pocket medical expenses; premiums for COBRA, excepted benefit coverage, or STLDI|
|Employee Size Restrictions||Limited to businesses with fewer than 50 FTE employee||None||None|
|Maximum Reimbursement Limits||For 2021, the maximum reimbursement for single covered is limited to $5,250 and $10,600 for those with employee + dependent coverage||None||$1,800, regardless of ones coverage tier|