Individual HRAs and Health Care Reform

Earlier this year, rules were issued expanding health reimbursement arrangements (HRAs) in the individual market. HRAs are employer-funded accounts that employees may use to pay for medical expenses, including health insurance premiums. It was clarified that employees may use HRA amounts to purchase individual insurance policies outside of the workplace. These “individual coverage HRAs” allows employees to use tax-free employer dollars to buy individual health insurance. HRA funds are tax free to employers and employees, which means individual HRAs give the same tax benefits as traditional employer-sponsored group health plans.

Individual coverage HRAs may be offered beginning January 1, 2020. The IRS has a tool to help employers decide if they should offer an individual coverage HRA. The tool has health insurance premium information by geographic location and provides rate information for the least expensive plan in a certain category based on the employee’s age and location. The tool may be used by employers to determine if the individual coverage HRA is considered affordable based on HRA rules.

For more information on the HRA rules, click here.

To access the tool, click here.

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