Why the New HRAs Are Good for Business

A new final rule issued by the US Departments of Health and Human Services, Labor, and Treasury recently created two new types of Health Reimbursement Arrangements (HRAs): the individual coverage HRA and the excepted benefit HRA.

Available for January 1, 2020, plan start dates, these HRAs may be particularly appealing to smaller businesses. That’s because even though they’re funded by the employer, they offer companies more flexibility in their offerings, allowing them to be more competitive with bigger firms. The plans also give employees more control over their healthcare and help them lower expenses, which can boost their satisfaction with their benefits package.

Here’s what you need to know about both of the new HRAs.

  • Individual Coverage HRA: This option allows employers to offer HRAs to pay for employees’ individual health insurance policy premiums, if certain conditions are met. (Currently, many employers are prohibited from offering such HRAs.) In general, the rule permits an HRA to reimburse premiums for individual health insurance policies only if:
    • Individuals verify their enrollment in individual health insurance coverage;
    • The HRA is offered on the same terms to all employees within a class (with limited exceptions);
    • The employer does not offer the same employee both a traditional group health plan and the HRA;
    • Participants can opt-out of the HRA annually; and
    • Employers provide eligible participants with a written notice describing the HRA’s terms and its interaction with the premium tax credit.
  • Excepted Benefit HRA: An employer who offers a traditional group health plan can provide an excepted benefit HRA of up to $1,800 in 2020 (adjustable annually for inflation) to cover the cost of qualified medical expenses like copays, deductibles, or other uncovered costs. The funds can also be used to reimburse premiums for dental and vision coverage that are exempt from Affordable Care Act requirements. Employees can participate in an excepted benefit HRA even if they don’t choose to participate in the employer’s group health plan.

For more information review the HRA FAQs or contact Complete Payroll Solutions at 877.253.9020.

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