7 Health Reimbursement Arrangements (HRAs) to Offer Your Employees

Health Reimbursements Arrangements (HRAs) are employer-funded plans that provide tax-free reimbursements to employees for out-of-pocket medical expenses and, in some instances, tax-free reimbursements for insurance plans that employees obtain on their own. There are even different HRAs you can offer your employees. We’ve provided a breakdown of each one.

1. Integrated HRAs

Integrated HRAs can be offered by employers of any size. Its primary purpose is to cover some of the out-of-pocket expenses of a group health plan. It is most commonly paired with higher deductible group health plans and used as a cost savings strategy, but that is not a requirement.

• The Integrated HRA can only be made available to employees and their dependents who are covered by a traditional group health plan.

• The Integrated HRA and group health plan do not have to be offered by the same employer (although they are most commonly offered by the same employer). For example, an employer can offer an Integrated HRA to employees who are covered by a group health plan as a dependent through their spouse’s employer.

• If the group health plan provides minimum value (e.g., Bronze-like plan or better), the Integrated HRA may reimburse any medical expense allowed under Internal Revenue Code §213(d), such as deductibles, copays, coinsurance, dental, vision and over-the-counter drug expenses.

• If the group health plan does not provide minimum value (e.g., a limited benefit group health plan), the Integrated HRA may only reimburse out-of-pocket expenses associated with the group health plan, such as deductibles, copays, and coinsurance.

2. Qualified Small Employer HRAs (QSEHRAs)

Qualified Small Employer HRAs (QSEHRAs) can only be offered by employers with fewer than 50 employees. Its primary purpose is to reimburse insurance premiums for coverage that employees obtain outside of their employer. QSEHRAs are commonly provided by employers who are offering benefits to employees for the first time, or by employers who may find it difficult to provide a traditional group health plan to employees.

• Employees must be enrolled in minimum essential coverage to be eligible for reimbursements (e.g., individual major medical coverage, Medicare, spouse’s group health plan).

• The maximum annual reimbursement limit is $5,300 for employees with self-only coverage and $10,700 for employees with family coverage (adjusted for inflation).

• The QSEHRA may reimburse any medical expense allowed under Internal Revenue Code §213(d), such as premiums, deductibles, copays, coinsurance, dental, vision and over-the-counter drug expenses.

• Employees cannot waive coverage under the QSEHRA.

• The QSEHRA will reduce or eliminate subsidies for individual plans sold on the Health Insurance

  Marketplace.

• The employer cannot offer any type of group health plan to employees when offering a QSEHRA (e.g., health, dental, vision, Health FSA).

3. Individual Coverage HRAs (ICHRAs)

Individual Coverage HRAs (ICHRAs) can be offered by employers of any size. Its primary purpose is to reimburse individual major medical and Medicare premiums. ICHRAs are commonly provided by employers who are offering benefits to employees for the first time, by employers who may find it difficult to provide a traditional group health plan to employees, by employers who want to provide a specific class of employees access to a unique benefit, or by employers located in an area of the country where the individual major medical market is very competitive.

• Employees must be covered by an individual major medical plan or Medicare to be eligible for reimbursement under the ICHRA. Coverage under a short-term medical plan or a spouse’s group health plan would NOT qualify.

• The ICHRA may reimburse any medical expense allowed under Internal Revenue Code §213(d), such as premiums, deductibles, copays, coinsurance, dental, vision and over-the-counter drug expenses.

• The employer cannot offer the same employee the choice between a group health plan and an ICHRA.

• The employer may offer one class of employees a group health plan and another class of employees an ICHRA; however, at least 10-20 employees must be offered the ICHRA (depending on the employer’s size) when using the following classes: full-time vs. part-time, salaried vs. non-salaried, or offices with employees who work in different geographic locations within the same state.

• The employer may offer non-medical group health plans to employees covered by the ICHRA (e.g., dental, vision, Health FSA).

• Enrollment in an ICHRA eliminates subsidy eligibility on the Health Insurance Marketplace. Employees may waive coverage under the ICHRA and possibly qualify for a subsidy.

4. Medicare Primary HRAs

Medicare Primary HRAs may only be offered by employers who have fewer than 20 employees. Its primary purpose is to provide cost savings by reimbursing Medicare premiums as an alternative to enrolling in the group health plan.

• The employer must offer Medicare-eligible employees the ability to enroll in a group health plan with minimum value (e.g., Bronze-like plan or better), and Medicare must be the primary payer of coverage if the employee were enrolled in the group health plan.

• Eligible employees for the Medicare Primary HRA must be enrolled in Medicare Parts A and B. Employees who do not have Medicare Parts A and B cannot participate in the Medicare Primary HRA.

• Reimbursements are limited to Medicare Part B or D premiums, Medicare Supplement premiums, and dental and vision expenses.

5. Retiree HRAs

Retiree HRAs may be offered by employers of any size. Its primary purpose is to reimburse retirees for Medicare premiums. Retiree HRAs can be a more affordable benefits strategy compared to allowing retirees to remain enrolled in a traditional group health plan offered by the employer.

• The only eligible participants on the Retiree HRA can be former employees (i.e., retirees).

• The Retiree HRA may reimburse any medical expense allowed under Internal Revenue Code §213(d), including any Medicare premium, deductibles, copays, coinsurance, dental, vision and over-the-counter medication expenses.

6. Excepted Benefit HRAs (EBHRAs)

Excepted Benefit HRAs (EBHRAs) may be offered by employers of any size. Its primary purpose is to provide a tax-free benefit to employees who waive coverage under the employer’s group health plan.

• The employer must offer a group health plan to employees enrolled in the EBHRA; however, employees do not need to be enrolled in the group health plan.

• The annual maximum reimbursement limit is $1,800 (adjusted for inflation).

• Reimbursements are limited to COBRA premiums, short-term medical premiums, dental expenses, vision expenses, and out-of-pocket expenses for any coverage that is obtained outside of the employer (e.g., copays, deductibles, and coinsurance).

7. Dental/Vision HRAs

Dental/Vision HRAs may be offered by employers of any size. Its primary purpose is to provide an alternative to traditional group dental and vision plans. It allows employees to select a dental or vision insurance plan of their choice.

• Reimbursements are limited to dental and vision out-of-pocket expenses, including premiums for individual dental and vision insurance plans as well as copays, deductibles, and coinsurance specific to dental and vision expenses.