Changing the Face of HRAs

11.12.18

The Big Picture:

New regulations have been proposed by the Trump administration regarding the rules of health reimbursement accounts (HRAs). The regulations would give employers of all sizes additional flexibility to provide greater choice to their employees.

The regulations, proposed by the Departments of Labor, Health and Human Services, and Treasury would roll back an Affordable Care Act provision that barred HRAs from being used toward individual health insurance unless the employer was a qualified small business (those with less than 50 employees). In addition, employers who offer group health insurance would be able to offer a new type of HRA to reimburse certain excepted benefits, such as standalone dental benefits and premiums for a short-term health insurance plans.

 

Highlights:

HRAs are entirely employer-funded plans that reimburse employees for medical expenses not covered by company-sponsored insurance. This may include deductibles and copays. Currently, HRAs are offered by employers of ever shape and size.

Qualified small employers are able to take advantage of QSEHRAs (Qualified Small Employer Health Reimbursement Arrangements). The most important difference between a QSEHRA and a regular HRA, is that a QSEHRA is not coupled with an employer sponsored health plan, meaning that employees may use the funds to reimburse themselves for individual medical plans. In a nutshell, QSEHRAs allow small employers to offer medical benefits in a tax-efficient, and budget friendly manner.

The proposed expansions will allow employers of any size to offer HRAs that can reimburse individual insurance premiums and/or out-of-pocket healthcare expenses in lieu of offering a group health plan.

 

Final thoughts:

The goal of the proposed regulations is to use HRAs as a lever that springs open more health care choices for employees and employers.  Getting from here to there, however, can be complicated, confusing and risky depending on how this initial guidance shapes its way forward.

If passed, the new rulemaking will not take affect before 2020.  Future updates and interpretations are to be expected.