Combining HRAs and HSAs

It’s no surprise that more and more employers are offering qualified high deductible health plans (HDHPs) to their employees, and some employers are combining Health Reimbursement Arrangements (HRAs) and Health Savings Accounts (HSAs) to alleviate a portion of the deductible and/or out-of-pocket expenses that employees are exposed to. However, you have to be very careful with the HRA plan design  in order to preserve HSA eligibility for employees. 

In 2020, HSA-eligible health insurance plans (i.e. HDHPs) must have a minimum deductible of $1,400 for single coverage and $2,800 for family coverage. Per HSA guidelines, the HDHP cannot provide any coverage prior to the minimum deductible being satisfied (with an exception for preventive care). The guidelines also prohibit any other plan or program from reimbursing or covering some or all of the minimum deductible amounts. 

For an employer to provide employees access to both an HRA and HSA, the HRA must be structured so that reimbursements are not available until the minimum deductible for an HDHP has been satisfied.¹ We refer to this as a post-deductible HRA. 

In 2020, this means the HRA should not provide reimbursement to an employee with single coverage until they have satisfied at least a $1,400 deductible. Similarly, this means the HRA should not provide reimbursement to an employee with family coverage until they have satisfied at least a $2,800 deductible.

It is noteworthy to comment further on the family deductible. Some plans have aggregate deductibles where there is a shared deductible that applies to the family, and the medical expenses of all family members are applied against that shared deductible. Other plans have embedded deductibles where each family member is responsible for their own deductible. 

Regardless of whether the deductible is structured as aggregate or embedded, a minimum deductible of $2,800 must be satisfied to preserve HSA eligibility.

Employers need to be careful when the HDHP has an embedded deductible. As an example, a plan with an embedded deductible of $1,400 per family member wouldn’t allow an employee to establish and HSA. The embedded deductible for each family member would have to be at least $2,800. Employers need to take this into consideration when establishing their HRA plan design.  It’s easy to overlook this requirement and not realize until a later date that a mistake had been made in the plan design.

¹HRAs which only reimburse dental and/or vision expenses will also preserve HSA eligibility.