The introduction of three new health reimbursement arrangement (HRA) plans have led to this main question from benefits broker consultants and employers: which HRA plan is right for me or for my client?
Various scenarios are included below on the following HRA plans:
- Qualified Small Employer HRA (QSEHRA)
- Individual Coverage HRA (ICHRA)
- Excepted Benefit HRA (EBHRA)
Scenarios for Each Plan Type
Employers are challenged with expanding their benefit programs and managing business costs effectively. These HRA plans empower an employer to manage costs more effectively and help to enhance their benefit package to meet the various needs of a diverse workforce and competitive labor market.
Effective Individual Coverage HRA (ICHRA) Scenarios
- Employer offers a group health plan (GHP), but a group of employees are not eligible for coverage due to:
- Part-time/seasonal status.
- Non-completion of waiting period.
- Separate line of business.
- Geographic area - The carrier doesn’t offer coverage in an area or provide for in-network benefits.
- An employer can only afford basic minimum essential coverage (MEC) plans and determines those plans are not enough coverage for their employee base. Employer decides to cancel their GHP and provide an ICHRA so employees can find their own coverage.
- An employer with seasonal employees (ex., retail, hospitality or agriculture industry) offers a GHP and hires several temporary employees through a staffing firm during busy times of the year. These employees are not eligible for the GHP but the employer wants to provide them a health benefit.
- Employer offers a GHP, but the employee’s portion of the premium is too expensive for hourly employees, although deemed affordable by the ACA’s standard. The employer decides to class out these employees based on hourly employment status so they can choose their own health plans.
- An employer has many older workers in a certain division located in a specific geographic location that are on Medicare. Employer wants to help those employees reimburse Medicare premiums without worrying about the HRA integration requirements. Employer offers ICHRA to all eligible employees at the geographic location, classed out from their other employees. The employees can then choose to reimburse eligible qualified medical expenses, individual medical premiums and Medicare premiums (including Part D coverage) using the ICHRA.
- Employer wants to offer an HRA benefit while avoiding the HRA integration requirements, but offer employees the opportunity to contribute to a health flexible spending account (FSA) to reimburse additional unpaid medical expenses.
- Member of a commonly controlled group doesn’t offer health coverage, but another member of the group does. Employer wants to provide benefit to reimburse health premiums and 213(d) expenses.
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Effective Excepted Benefit HRA (EBHRA) Scenarios
- Employer offers a GHP and desires to offer a limited benefit to reimburse qualified medical expenses under 213(d) and excepted benefit premiums such as dental, vision, COBRA, and short-term, limited-duration insurance. The employees must be eligible for the GHP but not required to enroll.
- Employer has traditionally put $500 in the FSA to fund additional employee out-of-pocket medical expenses; but due to the excepted benefit rule, was limited in the amount. By instituting the EBHRA, the employer may provide a larger, more meaningful benefit - up to $1,800 per participant per year.
- Employer acquires a company that has several former employees on COBRA that are now hired on with the new company and are in their 90-day GHP waiting period. Employer wants to reimburse employees for their COBRA coverage until they are eligible for the GHP.
Effective Qualified Small Employer HRA Scenarios (QSEHRA)
- A non-applicable large employer (ALE) cannot afford to offer a GHP, but wants to provide a benefit to help employees pay for medical premiums and other qualified medical expenses under 213(d).
- A non-ALE wants to offer similar benefits, as described in ICHRA, but wants to avoid ERISA, COBRA and NDT requirements.
- Benefits must be provided on the same terms to all eligible employees.
- A non-ALE would like to offer a benefit, in lieu of the GHP, and still permit employees to qualify for the advanced premium tax credit, if applicable.
- Small employer can’t afford to offer a GHP, so many employees gain coverage through their spouse’s employer’s GHP. The non-ALE wants to help employees pay for unreimbursed expenses on spouse’s GHP.
Advantages of Each Plan Type
- Ability to offer a benefit to class of employees even if they offer traditional GHP to another class.
- Can satisfy employer mandate requirements if an ALE.
- Ability to offer excepted benefit plans.
- Available to any size employer.
- There are no dollar limit restrictions and unlimited carryovers are allowed.
- Can also offer an FSA for maximum tax advantage.
- HRA is subject to ERISA, but individual policies are not subject if Safe Harbor conditions are met.
- Section 125 can be permitted for the excess portion of the premium not paid by the ICHRA for off-Exchange plans.
- The 90-day notice has a first-year exception that allows the notice to be provided by date of coverage for new employers.
- These plans can be health savings account (HSA) compatible.
- Can reimburse a variety of premiums to include Medicare Part D, supplemental coverage, COBRA, and student health insurance
- Employer can offer a group health plan or excepted benefits, although participation is not required.
- Any size employer can offer EBHRAs.
- Not subject to ACA mandate as it does not require an integration with a GHP and can standalone.
- Can reimburse short-term limited-duration insurance, COBRA premiums, dental and vision premiums.
- Can offer FSA with EBHRA for maximum tax advantages.
- Compatible with HSAs (post-deductible or limited purpose EBHRA).
- Allows for unlimited carryover amounts which are not included in the following year’s annual limit.
- Small employer can expand their benefit program to help attract and retain employees.
- Doesn’t eliminate the premium tax credit eligibility.
- Can be HSA compatible.
- Not subject to ERISA.
- Not subject to COBRA.
- Not subject to NDT.
How PrimePay Can Help.
PrimePay’s Broker Concierge partner program was founded to help benefits brokers succeed in a world of changing regulations. Designed by brokers, for brokers, it is the only program of its kind that provides continuing education, resources, and content. For more information, visit BrokerConcierge.com.
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Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Consult your own legal advisor regarding specific application of the information to your own plan.