Welcome to the Agent and Broker Video Learning
Center.
In this video, we’ll provide an overview
of several types of health reimbursement arrangements,
or HRAs: the individual coverage HRA, Excepted
Benefit HRA, and qualified small employer
HRA.
Let’s get started.
Regulations from the Departments of the Treasury,
Labor, and Health & Human Services expanded
the availability of certain health reimbursement
arrangements, or HRAs, that can be used to
provide employees with additional options
to obtain, quality, affordable health coverage.
An HRA is an account-based group health plan
funded solely by employer contributions that
reimburses an employee’s medical care expenses,
and those of any covered dependents.
HRA reimbursements for qualified medical expenses
are excluded from the employee’s income
for federal income tax and employment tax
purposes.
As you help employers understand their coverage
options and whether to offer an individual
coverage HRA to their employees, it’s important
for employers to understand several requirements
and considerations.
Under the individual coverage HRA rules, employers
can offer an individual coverage HRA, which
provides money on a pre-tax basis for employees
to use on qualified medical care expenses,
including the cost of individual health insurance
coverage premiums and Medicare.
To accept and keep an individual coverage
HRA offer, employees must enroll in individual
health insurance coverage or Medicare Parts
A and B, or Part C.
For the purposes of offering an individual
coverage HRA, employers can establish classes
of employees based on specified criteria,
like status as a full-time or part-time employee,
or a salaried or non-salaried employee.
For more information on the allowable classes,
check the video description below, which includes
an FAQ on the regulations.
Employers generally have to offer an individual
coverage HRA on the same terms to all employees
within a specific class, although the amounts
offered may be greater for older employees
(within limits) and for employees with more
dependents.
There is no limit on how much employers may
contribute to the individual coverage HRA
each year, and employers can allow unused
amounts in any plan year to roll over from
year to year.
However, employers can maintain a traditional
group health plan for current employees while
beginning to offer individual coverage HRAs
to new hires in the same class of employees.
The rule does not allow any class of employees
to be offered both a traditional group health
plan and an individual coverage HRA.
The rules for the classes may allow employers
to offer health benefits for the first time
to employees to whom they have not previously
offered coverage, such as part-time or seasonal
employees.
Additionally, an individual coverage HRA that
is affordable is deemed to meet the minimum
value standard, so applicable large employers
will not be subject to an employer shared
responsibility payment if their individual
coverage HRA offer is affordable to their
employees.
Depending on the affordability of an employer’s
offer, the individual coverage HRA offer could
impact an employee’s eligibility for a premium
tax credit.
If the individual coverage HRA offer is considered
affordable for an employee, the employee will
not qualify for a premium tax credit that
would reduce the cost of individual coverage
purchased through HealthCare.gov or a State-based
Exchange, even if the employee turns down
the individual coverage HRA offer.
If the individual coverage HRA is not affordable
for an employee, the employee may receive
a premium tax credit if they opt out of the
individual coverage HRA and otherwise qualifies
for the tax credit.
If the employee chooses to accept the employer’s
individual coverage HRA offer, regardless
of whether it’s affordable, they will not
be eligible for a premium tax credit.
You may be wondering, what determines if an
offer is affordable for an employee?
An individual coverage HRA is considered affordable
if the premium the employee would pay for
the lowest cost self-only silver plan, after
their self-only HRA reimbursement amount,
does not exceed a certain percentage of their
household income.
This percentage is called the required contribution
percentage.
The required contribution percentage is published
annually on IRS.gov and HealthCare.gov.
A downloadable tool is available to help applicable
large employers determine how much to contribute
to an individual coverage HRA to make it affordable,
in order to help large employers comply with
the employer shared responsibility payment
requirements.
This tool gives employers access to health
insurance premium data by geographic location,
providing specific rate information for the
lowest cost silver plan based on an eligible
employee’s age and geography.
To access the tool directly, follow the link
in the description below.
An employer offering an individual coverage
HRA must give a written notice to its employees,
generally at least 90 days before the start
of the individual coverage HRA’s plan year.
Note that the employer notice must include
important information about the individual
coverage HRA, such as the dollar amount of
the offer and whether the offer extends to
dependents, among other things.
You can learn more about the employer notice
by following the link in the description below.
The individual health insurance coverage employees
purchase with an individual coverage HRA will
not be considered part of an employer-sponsored
group health plan and subject to ERISA if
certain conditions are met.
Under these conditions, the employer may not
select, endorse, or favor any particular issuer
or insurance coverage and cannot limit their
employees’ ability to use their individual
coverage HRA with any individual health insurance
coverage option that would otherwise be available
to them.
Additionally, the employer or other individual
coverage HRA plan sponsor may not receive
any consideration in the form of cash or otherwise
in connection with the employee's selection
or renewal of any individual health insurance
coverage.
Also, the purchase of any individual health
insurance coverage must be completely voluntary,
reimbursement for non-group health insurance
premiums must be limited solely to individual
health insurance that does not consist solely
of excepted benefits, and each plan participant
must be notified annually that the individual
health insurance coverage is not subject to
ERISA.
Also, an employer wanting to take advantage
of a Cafeteria Plan to allow the employee
portion of a premium to be pre-tax cannot
do so for coverage purchased through HealthCare.gov
or a State-based Exchange – meaning employees
have to buy the individual coverage off-Exchange
under such circumstances.
The Treasury, Labor, and HHS regulations also
created another, limited kind of HRA known
as the Excepted Benefit HRA.
This type of HRA permits employers offering
a traditional group health plan to reimburse
employees that are also offered the group
health plan for their additional medical care
expenses.
Employees may use these Excepted Benefit HRAs
even if they do not enroll in the traditional
group health plan.
These HRAs must be made available under the
same terms to all similarly situated individuals,
regardless of any health factor.
Excepted benefit HRAs are limited in amount
– employer contributions may not exceed
$1,800 per year, indexed for inflation.
These HRAs can generally reimburse premiums
for:
COBRA or other continuation coverage,
Short-term, limited-duration coverage, or
Excepted benefits, such as dental and vision.
They generally cannot be used to reimburse
premiums for group or individual coverage
or for Medicare.
Small employers, generally those with fewer
than 50 full-time employees, have access to
another type of HRA: a qualified small employer
health reimbursement arrangement, or QSEHRA.
Small employers that don't offer group health
plan coverage to any of their employees can
provide a QSEHRA to their eligible employees
to help them pay for medical care expenses,
including the cost of premiums for qualifying
health coverage.
An eligible employee can use a QSEHRA to reimburse
their medical care expenses and those of any
covered dependents, if permitted by the employer.
The amount an employee receives in a QSEHRA
will also affect their eligibility for a premium
tax credit, as well as the amount.
When an employee applies for coverage through
Healthcare.gov or a State-based Exchange and
they are determined eligible for advance payments
of the premium tax credit, the advance payment
amount shown on their eligibility notice won't
account for the QSEHRA amount they receive
from the employer.
For this reason, an employee may not want
to use all of the advance payments for which
they are eligible.
We hope this video was helpful!
If you are interested in learning more about
individual coverage HRAs, visit the resources
linked in the description below.
Thank you for watching!
