HRA’s To The Rescue!

The HRA’s Are Coming!

Expands the use of HRAs to allow for the purchase of individual health insurance coverage…..

Why would an employer not want to use HRA’s to allow employees to purchase individual health insurance policies? It takes the employer out of the health insurance business by transferring all risk, administrative burdens  and headaches to the nether world of health insurance companies. What a relief that would be!  But wait, aren’t individual health insurance policies always more expensive? No, not always, in fact many times it’s less costly………………..

Trump administration to expand use of HRAs to individual marketplace

The health reimbursement arrangements could be used to satisfy the employer mandate to offer coverage.

Susan Morse

The government is releasing a proposed rule to expand the use of employer-funded, tax-advantaged accounts called health reimbursement arrangements.

Currently, a health reimbursement arrangement allows employers to reimburse employees for out-of-pocket medical expenses. The Obama Administration had limited their use.

The Trump administration, through a rule to be published Monday, proposes to expand the use of HRAs to allow for the purchase of individual health insurance coverage, subject to certain conditions.

The rule does not change the Affordable Care Act mandate requiring employers who have 50 or more employees to offer coverage. But it does allow for the purchase of individual health insurance premiums to satisfy that mandate.


The change would have the biggest impact on companies that have less than 50 employees, according to the rule. It would allow small- and medium-sized companies that currently do not have health insurance benefits for their employees to offer this coverage.

According to preliminary estimates from the Treasury Department, once employers and employees have fully adjusted to the new rule, roughly 800,000 employers are expected to provide HRAs to pay for individual health insurance coverage to over 10 million employees.

But it could also lead to employers getting rid of their health coverage in favor of individual coverage through the ACA or short-term limited duration plans.

The proposal says conditions of the rule mitigate the risk that health-based discrimination could increase adverse selection in the individual market.

Comments on the proposed regulation are requested by December 28. The regulation, if finalized, would be effective for plan years beginning January 1, 2020.


In addition to allowing HRAs to reimburse the cost of individual health insurance coverage, the proposed regulation would allow employers offering traditional employer-sponsored coverage to offer an HRA of up to $1,800 per year, to reimburse an employee for certain qualified medical expenses, including premiums for short-term, limited-duration insurance plans.

Because medical expense reimbursements from HRAs are tax-preferred, HRAs provide the same tax advantage of traditional employer-sponsored coverage.

While the employer would fund the cost of individual health insurance coverage, the employee would own the coverage, allowing the individual to keep the coverage even if he or she left the employer and was no longer covered by the HRA.


This proposed regulation is in response to President Trump’s Executive Order on “Promoting Healthcare Choice and Competition Across the United States.”


“This fulfills the commitment the President made in his October 2017 Executive Order to foster competition and choice and to provide Americans – especially employees who work at small businesses – with more options for financing their healthcare. Treasury projects that this will benefit hundreds of thousands of employers and millions of workers,” said U.S. Secretary of the Treasury Steven T. Mnuchin.

“More access to association health plans, short-term insurance, and flexible HRAs complement the work we are doing at HHS to bring down drug prices and lower the cost of healthcare services. Each of these actions is focused on empowering patients through transparency, choices, and competition,” said U.S. Secretary of Health and Human Services Alex Azar.

“Of those smaller employers that provide health benefits, 81 percent offer only a single option. This proposal is about empowering American workers to have more consumer-driven healthcare choices, ” said U.S. Secretary of Labor Alexander Acosta.


In the near term, the proposed regulation, if finalized, would provide opportunities to employers, especially small and midsize employers who have struggled to offer coverage, to fund the cost of individual health insurance coverage on a tax-preferred basis.

HRAs would also simplify the administrative burden associated with managing employer-sponsored health plans.

Twitter: @SusanJMorse
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