On June 13, the U.S. departments of Health and Human Services (HHS), Labor (DOL) and the Treasury (IRS) issued a final rule allowing employers of all sizes to offer two new kinds of health reimbursement arrangements (HRAs), Individual Coverage HRAs and Excepted-Benefit HRAs. The departments also posted an FAQ on the new rule. The new HRAs are available beginning in 2020.

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  • The Individual Coverage HRA is an alternative to traditional group health plan coverage, subject to certain conditions. Among other medical care expenses, Individual Coverage HRAs can be used to reimburse premiums for individual health insurance chosen by employees not offered coverage under the employer group health plan.

    The Individual Coverage HRA is useful if an employer offers a group health plan but has a class of employee carved out from eligibility under their plan. Employers can create classes of employees around certain employment distinctions, such as salaried workers vs. hourly workers or full-time workers vs. part-time workers, and then offer an Individual Coverage HRA to certain classes while providing a group health plan to other classes. The final rule makes clear that an employer may not offer employees the choice between an Individual Coverage HRA and participation in a traditional group health plan.   
  • The Excepted Benefit HRA is the second new alternative to traditional group health plan coverage, subject to certain conditions. It allows employees that are eligible for an employer group health plan $1,800 per year pre-tax (indexed to inflation after 2020), even if they don’t enroll in the group health plan, for qualified medical expenses, including premiums for vision and dental insurance, COBRA continuation coverage, and in some circumstances short-term, limited-duration insurance (STLDI).

The final rule also has a number of disclosure requirements in order to assist employees in understanding how this new HRA coverage may impact eligibility for a premium tax credit under the ACA Marketplace. The DOL also issued Individual Coverage HRA Model Attestations that employer may use to confirm their employees have individual health insurance coverage while covered under an Individual Coverage HRA.

Additional guidance is on its way regarding several outstanding issues, such as a safe harbor for Individual Coverage HRAs with regards to the ACA requirements of affordability and minimum value.

PrimePay will continue to provide updates on these two new HRAs as they become available.

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