What is an EBHRA or Excepted Benefit HRA? How does EBHRA work? These are among the top questions we hear about this new type of Section 105 HRA. Let's dive in.
What does EBHRA stand for?
EBHRA stands for Excepted Benefit HRA.
What is the Excepted Benefit HRA (EBHRA?)
The Excepted Benefit HRA is a new flavor of Section 105 HRA with some unique benefits and applications. It allows employers of any size to provide a supplement to group health insurance of up to $1,800 each year. It must be offered on the same terms and conditions to all similarly situated employees.
Where did the "Excepted Benefit HRA" come from?
In October 2018, the U.S. Departments of the Treasury, Health and Human Services, and Labor proposed new regulations to expand the usability of health reimbursement arrangements (HRAs). This is the 3rd and final part of President Trump's Executive Order from October 2017 (E.O. 13813) to reform the health system through regulatory changes. You can see the press release, accompanying fact sheet, and proposed rule itself here. The final rules were passed June 13, 2019 that outline EBHRA, ICHRA (Individual Coverage HRA), and QSEHRA (Qualified Small Employer HRA).
Why was EBHRA created?
Traditionally, HRAs have always been required to integrate with a group health plan unless they fit the narrow criteria to be considered a stand-alone HRA (like a QSEHRA). However, regulators have recognized that some employers may wish to offer tax-free reimbursement without regard to whether or not employees have qualified insurance coverage. The Excepted Benefit HRA offers reimbursement opportunities to employees that do not participate in the group health plan.
What are the requirements for an Excepted Benefit HRA?
There are four requirements for an HRA to qualify as an Excepted Benefit HRA:
- The HRA must not be an integral part of the plan;
- The HRA must provide benefits that are limited in amount;
- The HRA cannot provide reimbursement for premiums for certain health insurance coverage;
- The HRA must be made available under the same terms to all similarly situated individuals.
Do employers have to offer a group health plan to use an Excepted Benefit HRA?
Technically, yes, an employer must offer group health insurance in order to also offer an Excepted Benefit HRA. However, unlike traditional HRAs, employees do not have to participate in the group plan in order to receive reimbursements. This is really what separates this new HRA from traditional HRAs which required employees participate to receive reimbursements.
What are "excepted benefits?"
"Excepted Benefits" is insurance jargon to refer to insurance plans that are not primary health plans. Examples of excepted benefits include vision insurance, dental insurance, long-term care insurance, nursing home care, etc.
What can EHBRA pay for?
Individual major medical premiums, coverage under a group health plan, and Medicare Parts B and D are not excepted benefits and would not be eligible. The proposed rules make exceptions that would allow for payment of COBRA premiums, short-term plans (STLDI), and individual or group plans that consist solely of excepted benefits.
What are the limits for EBHRA?
Employers can offer $1800 a year starting in 2020 to employees. While this does not sound like much, this works out to $150 a month which can go pretty far for non-major medical health insurance plans. The $1800 amount is tied to inflation, so it'll go up a little bit every year.
Can unused EBHRA funds carry-over to the next year?
Yes, if an employee does not use all of his or her allowance in a given year, the unused balance can carry-forward to the next year. Presumably, the employer will be able to choose whether to allow this or not, but we'll see. According to the proposed rules, any carry-over amount will not count towards the annual maximum the following year.
Can an Excepted Benefits HRA work with other types of HRAs?
Because an Excepted Benefits HRA requires a group health plan be offered, it will not work with the newly proposed Individual Integrated HRAs or existing QSEHRAs.
However, the proposed rules do allow employers to offer different benefit solutions to different classes of employees (assuming the classes are defined in a fair manner).
An employer could offer an Excepted Benefits HRA to one class (say, part-time employees) and a QSEHRA to full-time employees.
I wrote this blog to help people make smart health insurance decisions. I am a small business owner, a husband, and a dad to three boys, so I've seen firsthand how important understanding insurance decisions can be. As a co-founder of Take Command Health and a licensed health professional, I've been recognized as a leading expert on healthcare transparency and defined contribution arrangements (QSEHRA). I've been featured in the New York Times, Wall Street Journal, Dallas Morning News, Forbes and others. Learn more about me and connect with me on our about us page. Thanks!