Can I use an HRA to pay insurance premiums? Deep dive questions related to premium reimbursement

Health insurance costs look different for every employee. Age, location, family size, and job status all affect what someone pays for coverage.

That variability is a big reason employers choose health reimbursement arrangements (HRAs) over a single group plan. An HRA lets a business set a reimbursement budget and allow each employee to apply it toward the coverage that fits their situation, tax-free.

Once a plan is running, the questions get specific:

• Does it cover COBRA while someone is between jobs?

• What about an employee who's aged into Medicare?

• Can the reimbursement amount vary from one employee to the next?

• What happens if reimbursement needs go beyond what the plan allows?

If you're still working through the fundamentals, including how QSEHRA and ICHRA (now called CHOICE Arrangement) are structured, our foundational guide on reimbursing employees for health insurance is the place to start. This post picks up from there.

A quick note on naming: CMS recently renamed ICHRA to CHOICE Arrangement. It's the same program with the same rules, just a new name. Since most of the industry is still calling it ICHRA, we'll use both terms throughout.

Can HRA be used for premiums?

Yes. Two HRA types are built for this purpose:

QSEHRA (Qualified Small Employer HRA)

• For businesses with fewer than 50 full-time equivalent employees

• Comes with IRS-set annual contribution limits, currently $6,450 for self-only coverage and $13,100 for family coverage in 2026

• Requires employees to carry minimum essential coverage (MEC) to receive tax-free reimbursements

ICHRA, now called CHOICE Arrangement (Individual Coverage HRA)

• Open to employers of any size

• No cap on contribution amounts

• Requires employees to carry individual market coverage or

• Medicare, not group coverage

Employers using either type of HRA decide whether the plan reimburses premiums only, or premiums plus qualified medical expenses. That single decision shapes which of the answers below apply to a given plan.

Can premium reimbursement amounts vary by employee?

Yes, and this is one of the more flexible parts of plan design. Employers can structure reimbursements a few different ways:

• The same amount for everyone. For example, $200 per month regardless of role or family status.

• By family size. Since individual market premiums typically cost more for families, an employer might offer $200 for single employees, $300 for married employees, and $600 for employees with families, or add a set amount per additional dependent.

• By employee age. Individual plans usually cost more for older employees, so reimbursements can scale up with age.

• A combination of family size and age.

ICHRA/CHOICE Arrangement also allows reimbursement amounts to vary by defined employee classes, such as full-time versus part-time or location, as long as the same rules apply consistently within each class. QSEHRA requires the same dollar amount for all employees, though it can still vary based on age and family size using an IRS-defined formula.

Can an HRA pay for Medicare premiums?

Yes, with some nuance. This question comes up often for employers whose workforce skews older or includes employees working past Medicare eligibility age.

Premiums that generally qualify:

• Medicare Part A and Part B

• Medicare Advantage plans

• Medicare Supplement (Medigap) plans

Under ICHRA/CHOICE Arrangement, an employee enrolled in Medicare Part A and B, or Part C, is treated as having qualifying coverage. This puts them on the same footing as employees using individual marketplace plans for reimbursement purposes, and it's one of the more common reasons employers choose CHOICE Arrangement for a workforce with a wide age range.

Worth knowing: Medicare integration rules get technical where active employees, retirees, and company size intersect. Employers with a meaningful number of Medicare-eligible staff should confirm the specifics with an HRA administrator before finalizing plan design.

Can I use my HRA to pay for COBRA premiums?

This depends entirely on which HRA type is in play, and it's a distinction worth understanding clearly.

• QSEHRA: Yes, if the plan is designed to allow it. COBRA coverage generally counts as minimum essential coverage, which satisfies QSEHRA's eligibility requirement. Employers can choose to let employees submit COBRA premiums for reimbursement.

• ICHRA/CHOICE Arrangement: No. ICHRA requires enrollment in individual market coverage or Medicare, not a continuation of group coverage. Since COBRA is technically a continuation of an employer's group plan, it does not satisfy ICHRA/CHOICE Arrangement eligibility, and an employee on COBRA cannot use CHOICE Arrangement funds to pay for it.

This question comes up most in a few situations:

• An employee leaving a previous job elects COBRA while starting a new role that offers a QSEHRA

• A spouse loses employer coverage, and the family elects COBRA to bridge the gap

• An employer wants to help former employees offset COBRA costs through a QSEHRA for a defined period

Because the answer depends so heavily on plan type and plan design, it's worth confirming the specific terms with an HRA administrator before assuming COBRA premiums are reimbursable.

Does COBRA apply to the HRA itself?

This is a related but different question. Beyond whether an HRA can reimburse COBRA premiums for other coverage, employers also need to know whether the HRA benefit itself is subject to COBRA continuation rules.

• QSEHRA and traditional HRAs are generally considered group health plans subject to COBRA. Employers with more than 20 employees typically must allow departing employees to continue their HRA allowance under COBRA, paid for by the employee.

• ICHRA/CHOICE Arrangement is treated similarly. Employers subject to federal COBRA must offer former employees the chance to continue receiving their CHOICE Arrangement allowance, provided the employee maintains qualifying individual coverage or Medicare and pays the required premium.

• Losing individual coverage does not, by itself, trigger COBRA eligibility for the CHOICE Arrangement benefit. The arrangement itself is the plan, so it can continue even if the underlying insurance policy lapses, as long as the employee's job loss or other qualifying event is what triggered COBRA in the first place.

Calculating the COBRA premium for an HRA benefit typically follows IRS guidance for self-insured plans, based on an actuarial estimate or the plan's past costs, rather than an individual employee's account balance.

Does an HRA cover a spouse's group plan premiums?

Sometimes, and this is one of the more commonly misunderstood differences between the two HRA types.

QSEHRA: Can be designed to reimburse an employee's share of premiums for a spouse's group coverage. This matters for small businesses where employees are often covered through a spouse's job.

ICHRA/CHOICE Arrangement: Does not extend to spousal group plan premiums at all, since a spouse's employer plan is group coverage rather than individual coverage.

For employers with employees who have access to a spouse's plan, this distinction alone can shape which HRA structure makes more sense.

Dental and vision premiums generally follow the same rules as medical premiums, whether purchased separately or bundled into an individual plan, and can typically be included in either HRA type at the employer's discretion.

What if an employee's insurance plan bundles medical and non-medical benefits?

Some insurance policies combine medical coverage with non-medical benefits, such as disability or life insurance, under one plan. In that case, only the portion of the premium tied to medical care can be reimbursed.

• The medical care portion must be separately stated in the policy, or billed on a separate statement, for it to qualify.

• Employers and administrators typically need documentation showing the cost breakdown before approving reimbursement.

This situation doesn't come up often, but it's a detail worth flagging for employees enrolled in bundled policies through a former employer or association.

What medical expenses can an HRA reimburse beyond premiums?

HRA-eligible expenses follow the same general framework used for the itemized medical expense tax deduction. This covers costs tied to diagnosing, treating, curing, mitigating, or preventing a disease or condition.

Common qualified expenses include:

• Visits and services from doctors, dentists, and other licensed healthcare providers

• Prescription medications, and certain over-the-counter items

• Medical equipment and supplies, such as eyeglasses or diabetes testing supplies

• Transportation for obtaining care, and in limited cases, lodging

• Long-term care services, and a capped portion of long-term care insurance premiums

One clear line: reimbursable expenses have to primarily treat or prevent an illness or disability. General wellness spending, like vitamins, gym memberships outside of a specific medical prescription, or travel, falls outside that line.

Employers can also narrow the list further. A plan can exclude entire categories, such as vision or over-the-counter items, as long as the exclusion applies evenly across every employee in a given class.

What premiums are excluded from HRA reimbursement?

Across both QSEHRA and ICHRA/CHOICE Arrangement, the following are generally excluded:

• Short-term limited duration insurance plans

• Association health plans

• Coverage that doesn't meet ACA requirements for minimum essential coverage, or for a qualified individual health plan under ICHRA/CHOICE Arrangement

• Fixed indemnity and preventive-only or limited benefit plans

• Medical sharing plans under ICHRA/CHOICE Arrangement (QSEHRA can reimburse these, but only when the employee is also enrolled in a minimum essential coverage plan)

These exclusions keep HRAs aligned with ACA compliance standards. Coverage types that look similar to insurance aren't always treated the same way under the tax code.

What if reimbursement needs go beyond what an HRA allows?

Sometimes an employer's goals stretch past what an HRA is built to cover. A health stipend is worth considering when a company wants to:

• Reimburse wellness expenses

• Cover a broader mix of premium types

• Simplify administration for a very small team

A stipend functions similarly to an HRA by reimbursing medical expenses, premiums, and out-of-pocket costs, but without the same IRS restrictions.

The tradeoff: HRA reimbursements are generally tax-free to the employee when the plan is administered correctly. Stipend payments are subject to income tax, payroll tax, and employer tax instead.

For most employers, the tax efficiency of an HRA outweighs the added flexibility of a stipend. The right choice depends on what a company is actually trying to accomplish.

How Take Command can help

Premium reimbursement raises a lot of specific, situational questions once a plan is in use, from how COBRA and Medicare fit in, to how reimbursements can be structured across a diverse workforce. Getting the details right protects both the employer's tax advantages and the employee's ability to use their benefit without complications.

Take Command helps employers design and administer QSEHRA and ICHRA/CHOICE Arrangement plans that handle these questions correctly from day one. If you're working through how Medicare, COBRA, spousal coverage, employee classes, or a health stipend should factor into your reimbursement strategy, our team is ready to help.

Check out our comprehensive guides to HRAs, ICHRA and QSEHRA. This guide walks you through what can be reimbursed with QSEHRA. Chances are, if you have a question about HRA administrators, we've got an answer for you!