Top Facts on the New IC-HRA and EB-HRA Options

What you need to know:

• Effective for plan years beginning on or after January 1, 2020, two new health reimbursement account (HRA) options will be available to employers - the Individual Coverage HRA (IC-HRA) and an Excepted Benefit HRA (EB-HRA).
• The IC-HRA will be open to employers of all sizes. It will allow employers to forego offering an employer-sponsored health plan and instead provide a tax-advantaged fund for employees that can be used to purchase policies on the individual market.
• The EB-HRA can be offered by employers who sponsor a health plan benefit. It permits employers to provide up to $1,800 per year, per employee that can be used for qualified medical care expenses including copays, deductibles, and other Section 213(d) expenses. The EB-HRA cannot reimburse health insurance premiums, but may reimburse premiums for excepted benefits such as dental, vision, short-term, limited-duration insurance (STLDI) and COBRA.
• Employees can enroll in the EB-HRA even if they do not enroll in the employer-sponsored health insurance, a key difference from traditional HRAs.

Charlotte, NC – June 26, 2019 –On Thursday, June 13, 2019 the U.S. Departments of Health & Human Services, Labor, and the Treasury announced the availability of two new health reimbursement account (HRA) options for plan years beginning on or after January 1, 2020 - the Individual Coverage HRA (IC-HRA) and Excepted Benefit HRA (EB-HRA).

IC-HRA Basics
The IC-HRA allows employers of all sizes the option to provide a tax-advantaged reimbursement account employees can use to purchase individual market insurance for themselves and their families. The IC-HRA cannot be offered to an employee class if the employer offers an employer-sponsored health plan benefit to the same class.

Employees (and their families, if applicable) must enroll in individual health insurance (or Medicare) to enroll and receive IC-HRA benefits. Employers must provide written notice to all IC-HRA eligible employees and substantiate that employee participants (and their families, if applicable) are enrolled in individual health insurance.
There is no minimum or maximum contribution requirement, and the benefit amount may be adjusted based on employee age or number of dependents. However, to satisfy the employer mandate, employers will need to contribute enough for the IC-HRA to be considered affordable coverage.

In addition to individual insurance premiums, like other HRAs, the IC-HRA may also reimburse other medical care expenses under Code section 213(d) including copays, deductibles, and prescriptions. Employers can define which medical care expenses are eligible in their specific IC-HRA plan documents.

EB-HRA Basics
The EB-HRA allows an employer to provide up to $1,800 to cover qualified medical expenses for an employee in addition to a traditional health plan. Enrollment in the employer-sponsored health plan is not required for an employee to be eligible to receive the benefit, which is a key difference from traditional HRAs. Unused amounts are permitted to rollover, and amounts that are rolled over do not apply to the $1,800 annual contribution limit.

The EB-HRA cannot be used to purchase health insurance premiums, but it can be used to cover COBRA, short-term limited-duration insurance (STLDI), vision and dental policies in addition to qualified medical expenses like co-pays, deductibles and co-insurance.

Flores will continue to update our valued broker partners and employer clients with new developments on these account options.