On June 13, 2019, the final rule from the federal government regarding health reimbursement arrangements (HRAs) was released. The ruling helped to clarify existing HRA rules as well as provide confirmation about what to expect in 2020. With the new policy came the creation of two HRAs, The individual coverage HRA (ICHRA) and the expected benefit HRA (EBHRA).
Similar to the group coverage HRA, the excepted benefit HRA can be offered alongside a group health insurance plan. Employers wanting to offer an HRA as a supplement to a group health insurance plan may wonder which HRA would be the best fit for them.
In this post, we'll discuss the Excepted Benefit HRA and the Group HRA and compare them side-by-side.
Excepted Benefit HRA:
Under the affordable care act, excepted benefits are benefits that aren’t included in traditional health insurance plan. Excepted benefits include things like dental care, vision care, and other supplemental care.
The EBHRA allows employers offering a group health insurance plan to reimburse employees up to $1,800 in 2020 for premiums paid towards excepted benefits like COBRA, dental, vision, and short-term medical plans, as well as out of pocket medical expenses.
The excepted benefit HRA can be offered by businesses of any size. Employers can offer the HRA to any employees that have also been offered a non-excepted benefit, like a group health insurance plan.
Group Coverage HRA:
Group coverage HRAs allow employers to reimburse employees for their health care expenses, not including the premium paid towards the group health insurance.
The group coverage HRA is only offered to those enrolled in the group health insurance plan since it’s a supplement to help employees with their deductible costs.
With a group coverage HRA, a company offers a group health insurance plan but lowers the cost of premiums while keeping employees' coverage (risk) the same.
Employees using the group coverage HRA are reimbursed for out-of-pocket medical expenses. With group coverage HRAs, it is common for the plan to only reimburse deductible or co-insurance expenses that are also covered under the group health insurance plan. An Explanation of Benefits (EOB) is generally required with each reimbursement request.
In summary, with a group coverage HRA:
- The company offers a high-deductible health plan (HDHP).
- The company offers a group coverage HRA plan to reimburse out-of-pocket medical expenses (often just for deductibles and coinsurances for expenses covered by the HDHP).
- Allowances are given annually, and there’s no rollover of unused funds year to year.
Excepted benefit HRA vs group coverage HRA
|HRA Type||Excepted Benefit HRA||Group Coverage HRA|
|Allowance||up to $1,800 annually for 2020||No maximum allowance|
|Employee Eligibility||All employees that were offered the group insurance plan.||Only available to employees enrolled in the group health insurance plan.|
|Covered Expenses||Vision insurance, dental insurance, short-term medical insurance, out-of-pocket expenses||Out of pocket expenses, not including the group insurance premium.|
|Roll-over||No rollover||No rollover|
|Available to||Businesses of all sizes||Businesses of all sizes|
The excepted benefit HRA and the group coverage HRA are both great options for employers that want to offer an HRA in addition to a group insurance plan. Identifying the HRA that is best for a given business depends on the size of allowance the business wants to offer, the employees the business wants to cover, and the types of expenses the business wants to cover. Before making a choice, business owners should understand the differences between the plans and make a decision based on which plan aligns with their needs more closely.