2020 Changes to Health Reimbursement Accounts (HRAs)

On June 20, 2019, new Health Reimbursement Account (HRA) rules were released by the Departments of Labor, Health and Human Services, and the Treasury, which can be found here.  The changes go into effect for plan years beginning on or after January 1, 2020, and introduce two new types of HRAs:

1. Individual Coverage HRA (ICHRA)
   1. Employers of any size can fund an ICHRA
   2. Can be used to reimburse premiums for individual health insurance chosen by the employee, promoting employee and employer flexibility, while also maintaining the same tax-favored status for employer contributions towards a traditional group health plan
   3. Individuals must purchase an individual insurance plan either privately, through an exchange or Medicare coverage, noting that amounts received through an ICHRA will negatively impact availability of a subsidy through the exchange
   4. Employers determine what the maximum contribution is and if funds roll from year-to-year
   5. Employer must offer it on the same terms to all individuals within a class of employees, except that the amounts offered may be increased for older workers and for workers with more dependents
2. Excepted Benefit HRA (EBHRA)
   1. Employers of any size can fund an EBHRA
   2. Permits employers to provide funds for additional costs of copays, deductibles, or other expenses not covered by the primary plan, even if the employee declines enrollment in the group health plan
   3. Employees must be offered a group health plan through the employer, but employees don’t need to enroll in the group health plan
   4. It cannot be used to reimburse health insurance premiums or Medicare premiums, but can be used to reimburse COBRA premiums, dental coverage, and vision coverage
   5. Employers can fund up to $1,800 in 2020, which will be adjusted for inflation beginning in 2021
   6. Funds can rollover from year-to-year, and rollover amounts are not counted toward the annual maximum
   7. Reimbursements provided to employees do not count toward the employees’ taxable wages
   8. Separate plan documentation will be required

Note that employees cannot be offered both an EBHRA and ICHRA.

More information can be found at:

https://www.hhs.gov/about/news/2019/06/13/hhs-labor-treasury-expand-access-quality-affordable-health-coverage.html

https://www.hhs.gov/sites/default/files/health-reimbursement-arrangements.pdf

https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans