The new rule creates two new types of HRAs that employers may offer:

1. An individual coverage HRA, which must be paired with individual market insurance coverage selected by the employee
2. An excepted benefit HRA, which can be used to reimburse various types of medical expenses (but not individual market coverage or group coverage)

Employers and other plan sponsors can begin offering these new HRAs as early as the plan year starting in 2020. Consequently, employers or other plan sponsors interested in offering these types of HRAs will need to become familiar with the complex rules that govern them.

These new types of HRAs can be offered by employers of any size, including large employers that are subject to the Affordable Care Act’s employer shared responsibility penalty.

Individual Coverage HRA

Effective for the 2020 plan year, employers and other plan sponsors can offer an individual coverage HRA that reimburses participants for premiums and out-of-pocket medical expenses for individual health insurance (either on the federal Marketplace/state Exchanges or in the individual insurance market outside the Marketplace/Exchange). However, the employer cannot give individuals a choice between enrolling in a traditional group health plan or an individual coverage HRA; the employer can only offer one option or the other to any group of workers.

Employers or other plan sponsors can make different types of coverage available to different classes of employees/participants (as defined in the rule), subject to certain conditions. Those conditions are designed to prevent employers from steering less healthy individuals away from the group health plan and into the individual market. Complicated rules will govern whether the employer’s offer of an individual coverage HRA protects the employer from the employer penalty.

Excepted Benefit HRA

An excepted benefit HRA is limited in amount: the employer or other plan sponsor cannot contribute more than $1,800 each year to fund this HRA. The money can be used for certain medical expenses, including to purchase dental or vision coverage or pay COBRA premiums, but cannot be used to purchase group or individual market health coverage.

In addition, an employer or other plan sponsor must also offer the employee/participant the opportunity to enroll in a traditional group health plan (although the employee/participant does not have to elect coverage under that group plan).

Related Resources

Along with the final rule (which is scheduled to be published in the Federal Register on June 20, 2019), the Departments released a number of other documents:

• A series of answers to Frequently Asked Questions (FAQs);
• A model notice to employees/participants that employers or other plan sponsors can use to meet the requirement that they provide a detailed notice 90 days before the start of the plan year in which employees/participants will be offered an individual coverage HRA; and
• Model attestations of enrollment in individual market coverage that employers or other plan sponsors can use once each year (upon enrollment in the HRA) and as part of the substantiation requirement for each claim for reimbursement that is submitted.