Though they’ve evolved many times, HRAs aren’t new.
When the price of group health insurance began to rise in the 1960s, businesses and lawmakers began experimenting with innovations to ease the pressure. In 1974, Congress introduced HRAs through the Employee Retirement Income Security Act (ERISA).
The first HRA was the group-coverage HRA. With a group-coverage HRA, businesses could offer both a group health insurance policy and an HRA. Many businesses used the HRA to ease the pain of choosing a lower-cost, high-deductible group policy; they gave employees allowance amounts equal to the deductible or reimbursed employees for items not covered under the group policy.
In the early 2000s, HRAs evolved to become a stand-alone benefit. At their height, stand-alone HRAs could be integrated with both group and individual coverage and businesses could offer unlimited allowance amounts. Businesses could also offer different allowance amounts to different employees dependent on job-based criteria, like an employee’s title.
HRAs were significantly limited by IRS interpretation of the Affordable Care Act in 2013. Following the release of IRS Notice 2013-54, only three HRAs were available: the group-coverage HRA, a stand-alone HRA set up for one person, and an HRA set up for retirees.
In 2016, Congress created a new HRA with the passage of the 21st Century Cures Act: the qualified small employer HRA (QSEHRA). With the QSEHRA, small businesses with fewer than 50 employees could offer an HRA governed by new rules specified in the legislation.
HRAs continue to expand and, in 2020, two new HRAs will be available: the individual-coverage HRA (ICHRA) and the excepted-benefit HRA. These HRAs will be available to businesses of all sizes, and will in some ways more closely resemble the stand-alone HRAs of the past.