QUESTION: What is an excepted benefit HRA (EBHRA)?
ANSWER: EBHRAs are limited-dollar HRAs that qualify as excepted benefits and thus are not subject to the PHSA mandates. They can be offered by employers of any size that want to provide an account-based supplement to their group health coverage without being constrained by the requirements for integrated HRAs. EBHRAs are subject to the following requirements:
Limited-Dollar Benefits. Under an EBHRA, up to $1,800 (indexed for cost-of-living changes) can be newly available to each participant for each plan year to reimburse eligible medical expenses. (Carryovers permitted under the EBHRA 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.
Reimbursements. An EBHRA may reimburse out-of-pocket Code § 213(d) medical expenses other than premiums for individual health coverage, Medicare, or non-COBRA group coverage. Premiums for coverage consisting solely of excepted benefits can be reimbursed, as can premiums for short-term limited-duration insurance (STLDI) coverage, although, under certain circumstances, federal agencies may prohibit small employer EBHRAs in a particular state from allowing STLDI premium reimbursement.
Other Coverage. The employer must make other nonexcepted, non-account-based group health plan coverage available to the EBHRA participants for the plan year (enrollment in the other group health plan is not required). Thus, participants in the EBHRA could not also be offered an individual coverage HRA (ICHRA).
Uniform Availability. An EBHRA must be made available under the same terms and conditions to all similarly situated individuals, as provided by agency regulations.
An EBHRA’s status as an excepted benefit means only that it is not subject to health care reform’s PHSA mandates or HIPAA’s portability and nondiscrimination rules. Like other HRAs, however, EBHRAs are subject to ERISA unless an exception applies (such as 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 (SPD), and other ERISA requirements will apply. EBHRAs are also subject to HIPAA’s administrative simplification requirements (including the privacy and security rules) unless an exception applies (e.g., for certain small self-insured, self-administered plans). In addition, EBHRAs must comply with the Code § 105(h) nondiscrimination rules, which generally prohibit discrimination in favor of highly compensated individuals as to eligibility or benefits.
When deciding whether to offer an EBHRA, an employer should consider the impact on existing benefits, including health FSAs, HSAs, and existing HRAs (if any). Design decisions include which employees will be covered, how the EBHRA will coordinate with the employer’s other benefits, how much the employer will contribute, and which expenses the EBHRA will reimburse. An employer that has decided to implement an EBHRA must adopt appropriate documents before the beginning of the first plan year.
For more information, see EBIA’s Consumer-Driven Health Care manual at Sections XXVIII.C (“Excepted Benefit HRAs (EBHRAs)”) and XXVIII.D (“Chart Comparing HRA Options”).
Contributing Editors: EBIA Staff.