Group coverage HRA vs. excepted benefit HRA

For organizations across the country, a traditional group health plan is by far the most popular choice for employer-sponsored healthcare. In fact, the Kaiser Family Foundation¹ (KFF) finds that nearly half of insured Americans have health insurance coverage through their employer's group health plan.

While popular, KFF also finds that the cost of group health plans is on the rise, which may cause some employers to downgrade their group health plan. While this option may increase employees’ out-of-pocket costs, there are two health reimbursement arrangements (HRAs) employers can implement to supplement their group plan: the group coverage HRA (GCHRA), also known as an integrated HRA, and the excepted benefit HRA (EBHRA).

In this article, we'll discuss how GCHRAs and EBHRAs work and offer a side-by-side comparison so you can decide which is the best fit for your organization.

Download our comprehensive guide for everything you need to know about GCHRAs

What is an excepted benefit HRA (EBHRA)?

On June 13, 2019, the final rule² from the federal government regarding HRAs was released. The ruling helped to clarify existing HRA rules as well as provide confirmation about what to expect in the future. Along with the new policy came the creation of the EBHRA. Unlike an individual coverage HRA (ICHRA) or qualified small employer HRA (QSEHRA) that are used to reimburse individual health insurance policies in place of a traditional group health insurance plan, the EBHRA can be used along with a group plan to help with additional healthcare costs.

Under the Affordable Care Act (ACA), “excepted benefits” are benefits that aren't included in traditional health plan coverage.

Excepted benefits include:

• Non-health coverage
• Accident-only coverage
• Disability insurance
• Workers compensation insurance
• Limited health benefits
• Dental coverage
• Vision coverage
• Long-term care benefits such as a nursing home
• Short-term, limited-duration insurance (STLDI)
• Specific disease or illness coverage
• Cancer insurance
• Hospital Indemnity
• Supplemental health benefits
• Cost sharing such as copays, deductibles, and other health care expenses not covered by a primary plan

Through an EBHRA, employers offering a group health insurance plan can reimburse their employees up to the annual limit³ of $1,950 in 2023 (adjusted annually for inflation) for premiums paid toward the excepted benefits listed above, as well as other eligible out-of-pocket medical care expenses set by the employer. Keep in mind an EBHRA won't allow you to reimburse premiums for individual coverage, traditional group health plans, or Medicare. However, you can reimburse premiums for COBRA or continuation coverage.

An EBHRA can be offered by organizations of any size as long as they offer a group health plan. However, employees don't have to be enrolled in your group plan to participate in the EBHRA—they must simply be offered coverage.

Also, with an EBRHA, employers can choose to let unused funds carry over year after year. Carryover amounts won't count toward the following year's limit.

What is a group coverage HRA (GCHRA)?

With a GCHRA, employers of all sizes can support the healthcare needs of their employees by taking care of reimbursable expenses. But this won't include the premiums paid toward their group health insurance plans.

Unlike an EBHRA, a GCHRA can only be offered to your employees who are enrolled in your group health insurance plan. This is because a GCHRA is designed to supplement your group plan to help employees with their deductible costs and other qualifying medical expenses that aren't fully paid for by the group plan.

Another thing that sets a GCHRA apart from an EBHRA is that it has no annual contribution limit. Without annual limitations, employers can offer their employees as much or as little of an allowance as they choose. Any unused amounts at the end of the year typically go back to the employer.

EBHRA vs. GCHRA comparison chart

Conclusion

Employers have healthcare coverage options beyond a traditional group health plan alone. The excepted benefit HRA and the group coverage HRA are both great options for employers that want to offer an HRA in addition to traditional group health coverage. Identifying the HRA that is best for you depends on the amount of allowance you want to offer, the employees you want to cover, and the types of expenses you want to reimburse.

If you want to offer a GCHRA to your employees, PeopleKeep can help you build and launch that benefit for your organization. Our personalized benefits administration platform makes it easy for employers to set up and manage HRAs and employee stipends in minutes each month.

Schedule a call with PeopleKeep now to start offering personalized health benefits to your employees!

This article was originally published on February 5, 2020. It was last updated March 23, 2023.

1. https://www.kff.org/other/state-indicator/total-population/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D
2. https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursement-arrangements-and-other-account-based-group-health-plans
3. https://www.irs.gov/pub/irs-drop/rp-22-24.pdf