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Final Rule Expands HRA Options

HRA options

2 minute read

On June 13, 2019, the Departments of Labor, Health and Human Services, and the Treasury Department issued a final rule that expands the use of health reimbursement arrangements (HRAs) effective in 2020.

The final rule establishes two new types of HRAs:

Individual Coverage HRA: This ruling allows employers to offer an HRA in lieu of a group health plan, subject to certain conditions. The HRA can be used to reimburse the cost of health insurance premiums in the individual marketplace, if the following conditions are met:

  • The participant and dependents must be enrolled in the individual health insurance coverage each month that they are covered by the HRA
  • The employer cannot offer a traditional group health plan to the same class of employees who are offered the individual coverage HRA
  • The HRA must be offered on the same terms to all participants within a class
  • Participants must be allowed to opt out of and waive future reimbursements from the HRA once per plan year
  • The employer must implement “reasonable procedures” designed to substantiate that the participants and dependents are actually enrolled in individual health insurance coverage
  • The employer must provide written notice to eligible participants containing certain information.

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Excepted Benefits HRA: This ruling allows employers who offer traditional group health coverage to offer an HRA up to $1,800 per year (as adjusted) to cover certain qualified medical expenses, including premiums for the following types of plans. An excepted benefit HRA cannot reimburse premiums for individual health coverage, or health coverage under a group health plan (except as stated below), or Medicare Parts B or D.

  • Individual or stand-alone vision and dental plans, accident-only coverage, workers’ compensation coverage, or disability coverage
  • Short-term, limited-duration insurance plans
  • COBRA coverage.

For more information, download the bulletin.

NIS is gathering information on the new ruling and evaluating how this may or may not affect our customers with HRAs. Stay tuned to our blog for the latest developments.

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Ken Zastrow

Ken Zastrow

Ken Zastrow is a post-employment benefit expert. He educates public sector employers and helps them determine the best benefit application for their organization. Ken enjoys visiting clients and establishing/strengthening relationships. As an Employee Benefits Consultant, Ken works with HRAs, 403(b) plans, Employee Benefit Trusts, FSAs, and 3121 Social Security Alternative Plans. Ken is a licensed insurance agent (Health, Life, Series 6 and Series 63) as well as a registered financial representative with GWN Securities.