HRA administration company, Clarity Benefit Solutions, discusses new HRA laws going into effect.
Health reimbursement accounts (HRAs)—employer funded-plans that offer employees tax-free reimbursements for their qualified medical expenses—have been used by employees to pay out of-pocket medical expenses and/or health insurance premiums. The recently issued HRA laws will now give employers a new method to pay for their employees’ medical coverage, allowing them to utilize pre-tax dollars to subsidize employees’ health insurance premiums.
This new rule, issued by the U.S. departments of Health and Human Services, Labor and the Treasury, permits employers that do not offer a group coverage plan the ability to provide an HRA called an individual coverage HRA (ICHRA).
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With the new year, employees can use ICHRAs, which are funded by their employers, to purchase individual market insurance. This will include insurance that is purchased under the Affordable Care Act (ACA). Prior to this change, employers could not offer their employees any form of stand-alone HRA that would permit him or her to buy health coverage on an individual market.
The excepted benefit HRA is also a new law. This mandate allows businesses that offer group health insurance to also provide an HRA that reimburses its employees for items such as vision and dental, as well as short-term health premiums.
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This new rule allows employers more flexibility in their benefit offerings. Smaller employers will be better able to compete with their larger counterparts since they have access to this new option to finance their employee’s benefits coverage. Additionally, more options will allow employees to select the best options for their specific needs—which will lead to an increase in employee satisfaction and employee retention.
Employers can now provide their employees with either an ICHRA or a traditional group health plan because of these new laws. However, employees are not allowed to make that choice. Employers can also differentiate between salaried workers and hourly workers, full-time employees and part-timers, and onsite employees and remote employees. They may also offer an ICHRA to certain groups of employees while offering traditional group health plan coverage to others.
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