Health reimbursement arrangements (HRAs) are employer-funded health care accounts that reimburse employees for their eligible out-of-pocket medical expenses on a tax-favored basis.
Beginning in 2014, the Affordable Care Act’s (ACA) market reforms substantially limited the types of HRAs that employers could offer. Due to these reforms, most stand-alone HRAs are currently prohibited, although HRAs that are “integrated” with other group health coverage are still permissible. Also, effective for 2014 plan years, employers cannot use HRAs to reimburse employees for individual health insurance premiums without violating the ACA.
Due to a new federal law, small employers can adopt stand-alone HRAs without violating the ACA, effective for plan years beginning on or after Jan. 1, 2017. This new type of HRA, called a qualified small employer HRA (QSEHRA), can be used to help employees pay for their own health insurance policies and reimburse other out-of-pocket medical expenses.
Links And Resources
- IRS Notice 2013-54 and DOL Technical Release 2013-03 (guidance on integrated HRAs under the ACA)
- The 21st Century Cures Act, which created QSEHRAs, effective for plan years beginning on or after Jan. 1, 2017
For more information contact Sue Justice at firstname.lastname@example.org; 248-562-6413