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HRAs To Be Used On Individual Coverage

The U.S. Department of the Treasury, Labor, and Health and Human Services (tri-agencies) issued a final ruling on June 12, 2019 allowing employees to use the dollars in employer-funded Health Reimbursement Arrangements (HRAs) to purchase individual coverage. This applies to both on and off-Marketplace platforms and is referred to as Individual Coverage HRAs (ICHRAs).

The new ruling also created the excepted benefit HRA (EBHRA) to enable employees to be reimbursed for excepted benefit costs.

How to qualify as excepted benefits:

  • The annual HRA contribution must be limited to $1,800 per year (indexed for inflation beginning in 2021).

  • The HRA must be offered in conjunction with a traditional group health plan, although the employee is not required to enroll in the traditional plan.

  • The HRA cannot be used to reimburse individual health insurance premiums, group health plan premiums (other than COBRA), or Medicare premiums, although it can reimburse premiums for excepted benefits, such as dental and vision coverage, as well as for Short-Term, Limited Duration Insurance (STLDI).

  • The HRA must be uniformly available to all similarly situated individuals (as defined under the Health Insurance Portability and Accountability Act, which generally permits bona fide employment-based distinctions unrelated to health status).

When does this new ruling take effect?

Beginning January 1, 2020, employers can offering individual coverage HRAs to provide tax-exempt dollars for the purchase of Affordable Care Act (ACA) compliant individual coverage. Of note employers can offer their employees either a group health plan or an ICHRA - BUT NOT BOTH.

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