Types of HRAs
Below are five popular types of HRAs. Each serves a slightly different purpose.
Integrated, Standard, or Group Coverage HRAs
Integrated or Standard HRAs are accounts employers can offer as an added benefit to a qualifying group health insurance. They can only be used to reimburse or pay for qualified medical expenses like coinsurance, prescriptions, or standard 213(d) expenses.
In order to participate in an Integrated HRA, the person must be co-enrolled in a group health plan either through their employer or their spouse’s. This is true for anyone whose expenses will be reimbursed through the account, including spouses and child dependents.
Integrated HRAs have no annual contribution limits, so employers can choose the amount they’d like to deposit into the account.
Qualified Small Employer HRA (QSEHRA)
The QSEHRA is available to employers with less than 50 employees. The purpose of this type of HRA is to provide a way for employers to help employees purchase health insurance in the private market. The HRA contributions can also be used for qualified medical expenses like copays, coinsurance, and prescriptions.
In order to participate in a QSEHRA, the employee and anyone for whom they’d like to reimburse expenses must be co-enrolled in a health insurance plan that meets the ACA definition of minimum essential coverage.
There is an annual contribution limit for this type of HRA. For 2023, the limit for individuals is $5,850 and for families it’s $11,800.
Individual Coverage HRA (ICHRA)
The ICHRA allows individuals (i.e. people buying health insurance plans in the private market) to reimburse for health insurance premiums as well as out-of-pocket medical expenses. It’s available to all employers regardless of size and the IRS has no set limit on the annual amount that can be contributed to the ICHRA.
There are a few rules that go along with this type of HRA:
1. You and anyone for whom you’d like to reimburse expenses must have enrolled in a qualifying health insurance plan by the time the HRA begins. A qualifying health plan is one that meets the ACA definition of minimum essential coverage.
2. Employers must offer this to employees in lieu of a group health insurance plan. However, employers can choose to offer a group health plan to one class of employees (e.g. salaried employees) and an ICHRA to another class (e.g. hourly employees) provided that all employees of the same classification are offered the same options.
3. If you’re offered an ICHRA you’re still eligible for a tax credit if your HRA doesn’t meet the minimum standard for affordability (as set by the IRS) and you opt out. If your employer’s HRA does meet the minimum standard for affordability, you won’t be eligible for a tax credit even if you opt out.
Excepted Benefit HRA (EBHRA)
EBHRAs allow you to reimburse for premiums for COBRA coverage or short-term medical plans, dental and vision coverage as well as other qualified medical expenses. The annual contribution limit for EBHRAs is $1,950 in 2023. It is adjusted annually. There is no co-enrollment requirement for EBHRAs.
Retiree HRAs provide reimbursements for qualified medical expenses to retirees aged 65 and older. They are not required to be paired with any type of medical coverage but are intended to reimburse retirees for premiums associated with individual Medicare supplemental coverage or individual Medicare Advantage plans. Some Retiree HRAs will also reimburse for premiums for dental and vision coverage. The IRS has not imposed any annual limits for Retiree HRAs.