HRAs Integrated with Individual Insurance Coverage

December 22, 2018

A health reimbursement arrangement (HRA) is an account-based plan funded entirely by an employer, that an employee can then use to pay certain health-related costs. Under current rules, except in limited circumstances, an employer cannot maintain an HRA that reimburses employees for individual health insurance policies purchased by the employee; instead, an HRA generally must be “integrated” with a traditional group health plan. That prohibition, however, may soon be eliminated by new regulations proposed by the Departments of Labor, Treasury, and Health and Human Services. Under the proposed regulations, employers can provide funding to an HRA, which the individual can then use to purchase an individual health insurance policy.


The proposed regulations impose certain requirements on this arrangement. Employers cannot offer to the same employee both a traditional health plan and an HRA integrated with an individual policy. Employees must be enrolled in an individual policy, and the employer must verify that enrollment. The employer must offer the HRA on the same terms to all employees within the same class, but can modify funding based on employee age or family size. Finally, employers must provide specific notice regarding the HRA.

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