Health Reimbursement Accounts (HRAs) are a mystical creature, some might even call them the “Griffin of account-based plans“. (OK, in full disclosure, no one ever called them that until right now. However, humor us.)
If you haven’t kept up on your mystical creatures, the History channel, describes a Griffin as “an intimidating blend of two different predators said to possess the body and back legs of a lion as well as the wings, beak and talon of a hawk or eagle”. HRAs certainly possess a mystical quality. There is an intimidation factor. Plus, they are a blend of numerous things. Lastly, recent regulatory guidance is throwing in a few new mutations to keep the mystery alive.
So, clearly HRAs are the Griffin of account-based plans. But, I digress. Let’s dig into the new HRA mutations (aka new HRA rules).
What are HRAs under current rules?
HRAs are employer-funded. This is the one known certainty. Beyond that, HRAs have and continue to be largely a mystery. Employers design the HRA and set many of the rules (within IRS regulations) regarding what expense types will be covered, when expenses can be paid, and how much is available. In a post-ACA era, HRAs must generally be “integrated”. An integrated HRA consisted of two parts—the underlying group health plan and the HRA.
The group health plan is like the lion in the griffin. It is the strong foundation and keeps the plan grounded. It has set rules on what it is going to cover and ensures overall stability. The HRA is more like the hawk—it plays by its own rules and is always on the look-out to swoop in regarding unexpected expenses.
What do the new HRA rules allow?
New HRA rules were published in the Federal Register on June 20, 2019. The rules identify two new types of HRAs—the Individual Coverage HRA (ICHRA) and the Excepted Benefit HRA (EBHRA). Let’s unpack the mystery of these new HRA rules.
Individual Coverage HRA
- What should you know about eligibility? Employers of any size can fund an ICHRA. Employers can create classes of employees (ex.salaried vs.hourly, full-time vs. part-time, geographic region). All employees within a specific class must be offered the account on the same terms. Employees that are offered another group health plan are not eligible for an ICHRA.
- What are the insurance requirements? Individuals must purchase an individual insurance plan either privately, through an exchange or Medicare coverage. Amounts received through an ICHRA will negatively impact availability of a subsidy through the exchange.
- What is the maximum contribution? Employers determine what the maximum contribution is and if funds roll from year-to-year.
- When will ICHRA become available? The new rules become effective for plan years beginning on January 1, 2020 or later. However, given the date the new HRA rules were published, it is unclear if State and Federal Exchanges will be prepared to handle subsidy adjustments and the coverage requirements necessary to offer ICHRA.
- What questions remain regarding ICHRA? While the new HRA rules provide clarity on many aspects of ICHRAs, there are still several unknown factors regarding its interaction with individual mandate, exchanges, substantiation, and payment coverage rules. Further guidance will likely be necessary.
Excepted Benefit HRA (EBHRA)
- What should you know about eligibility? Employers of any size can fund an EBHRA. Employers must make the EBHRA uniformly available to all similarly situated employees. Employees must be offered a group health plan through the employer, but don’t need to enroll in the group health plan. Employees cannot be offered both an EBHRA and ICHRA.
- What are the insurance requirements? There are no direct insurance requirements for an EBHRA. That being said, EBHRA cannot be used to reimburse health insurance premiums. It can be used to reimburse COBRA premiums, however.
- What is the maximum contribution? Employers can fund up to $1,800 per year (adjusted for inflation). Funds can roll from year-to-year. Rollover amounts are not counted towards annual maximum. Some aggregation rules apply if there is more than one HRA.
- When will EBHRA become available? The new rules become effective for plan years beginning on January 1, 2020 or later. Benefit Resource will provide more detailed information in the coming months as the final details regarding EBHRA are clarified. If you intend to offer this plan, separate plan documentation will be required.
- What questions remain regarding EBHRA? While minimal, any time a new creature (or account) is identified, there are some outstanding questions. Although there do not appear to be any major outstanding questions that would delay availability for January 1, 2020.
Continue to uncover the mystery of HRAs. On August 7, 2019, Benefit Resource is offering a 30-minute webinar regarding the new HRA rules, HRA best practices and more. Register Now!