NEW HRA for 2020 – Employees Set to Use HRA to Buy Health Care Coverage

As of January 1, 2020, a newly issued regulation could transform how employers pay for their employees’ health care coverage.  This ruling will allow employers of all sizes that do not offer a group coverage plan to fund a new kind of Health Reimbursement Arrangement (HRA) known as an individual coverage HRA (ICHRA). 

On June 20, 2019, final rules were published by the Internal Revenue Service, Department of Labor, and the Department of Health and Human Services regarding Health Reimbursement Arrangements and Other Account-Based Group Health Plans.  “The new rule is primarily about increasing employer flexibility and worker choice of coverage.”  Said Brian Blase, Special Assistant to the President for Health Care Policy.  “We expect this rule to particularly benefit small employers and make it easier for them to compete with larger businesses by creating another option for financing worker health insurance coverage.“

ICHRAs can only be used to reimburse medical expenses consistent with the existing HRA rules, and under the NEW HRA rule:

  • Employers may either offer an ICHRA or a traditional group health plan but not a choice between the two.
  • Employers can create classes of employees around certain employment distinctions, such as salaried vs. hourly, full-time vs. part-time, and in certain geographical areas. Employers can offer ICHRAs to certain classes while providing traditional group coverage for others.
  • Employers that offer the ICHRA must do so on the same terms for all employees in a certain class, but may increase the amount for older workers and for workers with more dependents.
  • Employers can maintain their traditional group health plan for existing enrollees, and offer new hires only the ICHRA.

“… Employers will be able to provide their workers and their workers’ families with tax-preferred funds to pay all or a portion of the cost of coverage that workers purchase in the individual market.”  Said Joe Grogan, director of the White House Domestic Policy Council.

He goes on to say that once rules are set, roughly 800,000 employers will offer this HRA to pay for insurance for more than 11 million employees and their families.  This new HRA will provide them with more options that will better fit their needs.

This new plan may seem very familiar - the Qualified Small Employer HRA (QSE HRA) allows small businesses with fewer than 50 full-time employees to use their pre-tax dollars to reimburse employees who buy non-group health coverage, but the new rule goes further than that. 

The new HRA allows all employers, regardless of size, to pay premiums for individual policies, clarifies that when employers fund an ICHRA paired with individual-market insurance it will not cause it to become part of an ERISA plan provided certain safe harbor conditions are satisfied, and creates a special enrollment period.  With the QSE HRA, there is a maximum annual contribution limit, but the new rule doesn’t cap contributions for the ICHRAs.  Instead of having one choice, the QSE HRA, employers now have two.  With the QSE HRA, participants who obtain health insurance from an ACA exchange who are eligible for a tax credit must report to the exchange that they are participants.  ICHRAs, however, will not be able to receive any premium tax credits for exchange-based coverage.

In addition, the ruling creates a new Excepted-Benefit HRA that lets employers that offer traditional group health plans provide an additional pre-tax $1,800 per year to reimburse employees for certain qualified medical expenses, such as premiums for vision and dental insurance, COBRA continuation coverage, and in some circumstances short-term, limited-duration insurance.  The new excepted-benefit HRA can be used by employees whether or not they enroll in their employer’s group health plan.

Stay tuned as more information comes out on the new ruling, and how BASE® can help!

Making Health Care More Affordable: It Starts with Education

In the past year, health care spending exceeded $2.6 trillion and put a strain on many families and business owners.  Some factors that contribute to this rise in health care costs are the price of providing medical care, wasteful consumer medical spending, and personal health behaviors.  Avoiding the rise in health care costs is impossible, but learning about what you can do to manage these costs can help your family or your business.

According to a Monmouth University poll, one in four Americans report that the cost of health care is the biggest concern they face.  A poll asked consumers how difficult it was to pay for the following items: rent, groceries, health insurance premiums, health care deductibles and out-of-pocket costs, and taxes with health insurance and deductibles and out-of-pocket expenses were ranked second and third.  20% of the poll’s respondents said there has been a time in the past two years that they had to choose between paying for health care and paying for things like rent or mortgages and some forgoing much needed health care because they felt like they couldn’t afford it.  

“The growth of health care costs remains a burden,” said Patrick Murray, director of the Monmouth University Polling Institute.  “…a large number of Americans report that these concerns pervade nearly every aspect of their lives.”

It is now more important than ever for health care consumers to have access to the tools to help manage their employer-provided health care plans and out-of-pocket medical expenses.  As health care consumers, we all have the power to help reduce health care costs.

Where do we start?  It starts with EDUCATION.

We all play many rolls in our life, at work and at home.  As a trusted advisor, educate your clients on the current tax-advantaged benefit plan that could help their business save thousands of dollars a year in tax savings.  As an employer, educate your employees on how to properly use, and get the most out of, the benefit plans in place in the business.  As a health care consumer, educate yourself and your family on making better health care choices.  Check out a few of the ideas listed below to get started:

1.  In the workforce, educate on Health Reimbursement Arrangements (HRAs) and Flexible Spending Account (FSA) in the business.

Consumer-directed health plans (CDHPs) are the lowest overall cost option for your employees.  When paired together, Health Reimbursement Arrangements and Flexible Spending Accounts help those employees pay for all qualified expenses related to health care, which includes medical expenses such as deductibles, copays, and prescription costs.  Together, these plans offer cost-savings for the employer and benefit the employee.  Everyone has a unique health journey so with a variety of benefit options, employees can personalize their benefits selection.

2.  In your daily life, educate the better health care choices.

We, as health care consumers, can take any number of steps to improve our own health and save on medical expenses.  Anything from quitting smoking, losing weight, learning more about the benefits package implemented in our workplace and using it properly, to making other good choices about purchasing medical care, health care costs can be lowered and your overall health care spending could be reduced.

More than rent, taxes, or groceries; people worry about the cost of health care.  When health care consumers are properly educated, they are able to make smarter health care decisions, which can help save them money.  If you know anyone who could benefit from a tax-advantaged savings plan, BASE® is here to help.  BASE® can help educate and customize a benefit plan to meet your business’ needs.  Call 888.386.9680 or visit our website.