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A Health Reimbursement Arrangement (HRA) is sometimes referred to as an "account" but that's not accurate. An HRA is actually a health insurance plan that an employer sets up to help pay for employee medical expenses. HRAs offer employees reimbursements for expenses like prescriptions, office visits and exams and qualified medical expenses (which can range from transportation costs to a medical facility to psychiatric care or even medical supplies, but do not include premiums). But rules for HRAs changed in January 2020, and employers should understand their new options.
Starting in January of 2020, employers can now offer an "individual coverage HRA" in lieu of group health plans. The employees can use those pre-tax HRA funds to purchase their own comprehensive individual medical coverage either on or off the health insurance marketplace. HRAs continue to reimburse for qualified medical expenses as well, including copays and deductibles (but not premiums).
There also is a new "Excepted Benefit HRA" or EBHRA. The EBHRA allows employers to expand coverage to a larger employee base. For example, it lets them offer health insurance to employees who are eligible for coverage but for some reason didn't choose to be covered by the main health insurance benefits.
"The funds for these EBHRA plans are really figurative dollars," explained PayneWest Specialty Services Director, Christi Sharp. "The employer allows for a certain amount to be put in the account, but until a qualifying event occurs, no funds are exchanged via third-party administrator."
"These new EBHRAs help an employer round out their employee benefit offerings by providing reimbursement for additional types of health-related expenses," Sharp said.
There's been some discussion of other changes to HRA options, such as the ICHRA, or Individual Coverage Health Reimbursement Arrangement. While some insurance brokers love pushing the latest and greatest, Sharp cautions that really understanding how programs like an ICHRA can help or overly complicate an employer's benefits plan is very important. The ICHRA can be used to move employees out of the group benefit market and into the individual benefit market, but the coverage is often times more expensive and not as robust. In addition, ICHRA plans rarely offer long term and short term disability coverage.
Where some markets with a very diverse individual healthcare marketplace might find a lot of options, such as in large market areas, in states where there are not very many carriers (including Washington, Oregon and Montana) the rural areas with individual plans have a closed provider network with little to no benefits out of network. If you're the employer and you're encouraging employees in these areas to move to a limited marketplace, Sharp points out that you should be educated by your broker about how you're opening up your employees to problems.
Ultimately there are a lot of compliance factors to take into consideration when considering changes to your healthcare benefits. Federal regulations can be complex, and you want to make sure your broker is well educated and able to navigate your company through it all.