What You Need to Know About the New HRA Regulations
Starting January 1, 2020 employers will be able to offer two new Health Reimbursement Arrangements (HRA)- Individual Coverage HRA (ICHRA) and an Excepted Benefit HRA (EBHRA). These new regulations change current rules that prohibit employers from paying for an employee’s individual plan. The new regulations continue to allow HRAs that are integrated with a group health plan but broaden the options an employer has and provides an additional option for employers looking to implement a defined contribution approach.
1.Individual Coverage HRA (ICHRA)
As long as the individual purchases ACA-compliant health coverage, the employer can reimburse the employee for the premiums. This also includes premiums for Medicare plans. Employers can fund an ICHRA only for employees not offered a group health plan.
2. Excepted Benefit HRA (EBHRA)
Employers that would like to continue to offer traditional health benefits can offer an EBHRA of up to $1,800 per year to pay for out-of-pocket medical expenses, dental and vision premiums as well as COBRA. EBHRAs are only permitted if employees are offered coverages under a group health plan.
HRAs have always been a good option for employers that struggle with group health insurance costs. As access to these benefits expand, more employers may consider them as a viable alternative. The new HRA options will provide businesses a way to control their budgets while still offering a benefit to employees.
A defined contribution approach to employee health benefits is not new. Although the Trump Administration believes these HRA rules will appeal mostly to small-to-medium employers, it is likely that larger employers looking for an effective defined contribution approach to health benefits will take a serious look at ICHRAs. Any opportunity to budget health benefit expenses on the same basis as wage and salary increases is appealing to companies of all sizes.
In summary, the new rule does not change the employer’s current ability to integrate an HRA with their group health plan. The new rule provides additional options that employers may want to explore. The attractiveness of these options will depend on each employers staffing and benefit goals. As with any new ruling there is a host of compliance considerations such as ERISA, 125 and 105H Nondiscrimination, ACA Employer Shared Responsibility Rules, HSA Compatibility, Medicare and COBRA. For additional information regarding the new regulations and how it would apply to your specific situation please reach out to your Exude, Inc. Consultant.