What You Need to Know About HRAs for 2020

Illumeo Customer Success's Profile

For many employers, there are changes coming to the currently-offered Health Reimbursement Accounts (HRA) available to employees.  For health plans beginning on or after January 1, 2020, there are three types of HRA plans available, depending on the size of the employer.  The primary goal of the expansion of HRA opportunities is to provide flexibility and additional options to obtain quality, affordable healthcare for employees and their families.  

The three types of plans that will be available, depending on the size of the employer are as follows:

  • QSEHRA: Qualified Small Employer Health Reimbursement Account

  • ICHRA: Individual Coverage Health Reimbursement Account

  • EBHRA: Excepted Benefit Health Reimbursement Account

The QSEHRA plan has been available since 2016, but the plan is only applicable for employers with fewer than 50 full-time employees and with no group health insurance coverage.  All employees are automatically eligible for the plan. For 2019 an employer can contribute a maximum of $5,150 per single employee and $10,450 per employee with a family. These contributions are tax-free for the employee as long as the employee maintains the minimally required health-care coverage.

The ICHRA plan is available for employers to offer starting on January 1, 2020.  There is no employee-number restriction for employers choosing to offer the ICHRA plan.  However, employers offering the ICHRA plan can not offer a group healthcare plan; only one option can be selected.  Employers are not limited in the amount that can be contributed per employee. Employers can divide up their employee population into a maximum of 11 groups (using varying criteria such as full-time and part-time, hourly and salaried) to offer differing dollar amounts to each group.  The IRS has imposed minimum standards if a grouping schedule is implemented.   

Also new as of January 1, 2020, the EBHRA plan has no employee-number restriction for employers choosing to offer the EBHRA plan.  In addition to offering the EBHRA plan, the employer is required to offer group healthcare coverage. Any employee can participate in the EBHRA, regardless of participation in the group healthcare plan.  Contributions to this plan are limited to $1,800 per employee (for 2020) and family size does not change the limitations.  

Whether a medical expense is allowable for reimbursement by an HRA depends on the type of HRA.  Funds held in either a QSEHRA or ICHRA can be used for any type of medical expense. However, funds held in an EBHRA can only be used for excepted benefits, which are defined as insurance plans that are not the primary healthcare plan.  Examples are vision insurance plans, dental insurance plans, and long-term care insurance plans. Individual major medical plan premiums, coverage under a group healthcare plan, and Medicare Part B and D payments are not excepted benefits and cannot be paid for with EBHRA funds.  

Knowing and understanding the basics of the new HRA offerings is crucial for employees and employers both, to ensure they are prepared to follow along with the implementation as of January 1, 2020.