Is your business ready to take its health care benefits to the next level? One way to do so is to supplement group health coverage with an Excepted Benefit Health Reimbursement Arrangement (EBHRA). Here are some pertinent details.
Under a traditional HRA, the employer owns and funds the tax-advantaged account up to any chosen amount. However, traditional HRAs are subject to mandates under the Public Health Service Act (PHSA), which was amended by the Affordable Care Act (ACA).
There are limitations to employer contributions towards EBHRAs. As such, these accounts qualify as “excepted benefits” and aren’t subject to the PHSA mandates. Companies or employers of any size can offer Excepted Benefit Health Reimbursement Arrangements. However, they must follow certain rules, such as:
In 2022, up to $1,800 can be newly allocated to each participant per plan year to reimburse eligible medical expenses. This amount will rise to $1,950 for plan years beginning in 2023. This is the first time the limit has increased since these arrangements were launched in 2020.
Carryovers, which are permitted under both traditional HRAs and EBHRAs, are disregarded when applying the limit. Amounts made available under other HRAs or account-based plans provided by the employer for the same period will count against the dollar limit unless those arrangements reimburse only excepted benefits.
An EBHRA may reimburse any qualifying, out-of-pocket medical expense other than premiums for individual health coverage, Medicare or non-COBRA insurance group coverage. Premiums for coverage consisting solely of excepted benefits can be reimbursed, as can premiums for short-term limited-duration insurance (STLDI). However, under certain circumstances, federal agencies may prohibit small employer EBHRAs in particular states from allowing STLDI premium reimbursement.
The employer must make other non-excepted, non–account-based group health plan coverage available to EBHRA participants for the plan year. Thus, participants in the EBHRA were previously not eligible for a traditional HRA.
An EBHRA must be made available under the same terms and conditions to all similarly situated individuals, as provided by applicable regulations.
An Excepted Benefit Health Reimbursement Arrangement’s status as an excepted benefit means only that it’s not subject to the ACA’s PHSA mandates or the portability and nondiscrimination rules of the Health Insurance Portability and Accountability Act (HIPAA).
However, EBHRAs are subject to HIPAA’s administrative simplification requirements. This includes the law’s privacy and security rules unless an exception applies. Such as for certain small self-insured, self-administered plans.
And, like traditional HRAs, EBHRAs are subject to the Employee Retirement Income Security Act (ERISA) unless an exception applies. A couple examples would be for church or governmental plans. Thus, reimbursement requests must be handled in accordance with ERISA’s claim and appeal procedures; EBHRA participants must receive a summary plan description; and other ERISA requirements apply.
Finally, EBHRAs must comply with nondiscrimination rules. These generally prohibit discrimination in favor of individuals receiving high compensation regarding eligibility and offering of which benefits.
When deciding whether to offer an Excepted Benefit Health Reimbursement Arrangement at your business, you’ll need to consider various factors. These factors include:
We can help you assess the costs, advantages and risks of this or any other employee benefit you’re considering.