Employer HRAs (Health Reimbursement Accounts) have been expanded for more uses.
According to the HHS, press release, “starting in January 2020, employers will be able to use what are referred to as individual coverage HRAs to provide their workers with tax-preferred funds to pay for the cost of health insurance coverage that workers purchase in the individual market, subject to certain conditions. These conditions strike the right balance between employer flexibility and guardrails meant to protect the individual market against adverse selection, and include a notice requirement to ensure employees understand the benefit. Individual coverage HRAs are designed to give working Americans and their families greater control over their healthcare by providing an additional way for employers to finance health insurance.
“Many businesses have struggled with the high costs and complex bureaucracy of providing health insurance coverage, leading to less coverage for workers. Over the last decade, a significant number of small businesses have stopped offering any health insurance to their employees. As a result, a smaller percentage of Americans working in small businesses are being covered by employer health benefits, and many are left uninsured. Moreover, 80 percent of employers that provide coverage only offer one type of health plan to their employees, leaving workers and their families with no choices and plans that may not meet their needs.
“The HRA rule makes it easier for small businesses to compete with larger businesses by creating another option for financing worker health insurance coverage…
“The HRA rule also increases workers’ choice of coverage, increases the portability of coverage, and will generally improve worker economic well-being. This rule will also allow workers to shop for plans in the individual market and select coverage that best meets their needs. Because HRAs are tax-preferred, workers who buy an individual market plan with an HRA receive the same tax advantages as workers with traditional employer-sponsored coverage…
“In addition to allowing individual coverage HRAs,… the rule permits employers that offer traditional group health plans to provide an excepted benefit HRA of up to $1,800 per year (indexed to inflation after 2020), even if the employee doesn’t enroll in the traditional group health plan, and to reimburse an employee for certain qualified medical expenses, including premiums for vision, dental, and short-term, limited-duration insurance. This provision will also benefit employees who have been opting out of their employer’s traditional group health plan because the employee share of premiums is too expensive.”