Employers and employee organizations are often looking for new, creative ways to expand, streamline, or restructure employees’ health benefits.  Starting in January 2020, employers may offer two different health reimbursement arrangements (“HRA’s”) to their current employees.  Typically, employers offer HRAs for retirees through collective bargaining agreements but do not offer them for current employees because of restrictive HRA rules.  Under new rules issued on June 13, 2019, employees can benefit from two new types of HRAs, starting on January 1, 2020: Individual Coverage HRAs and Excepted Benefit HRAs.  Read on to learn more about these new HRA options and whether your agency might offer them through the collective bargaining process.

Overview: What is an HRA?

Employers may reimburse employees tax-free for qualified medical expenses through Health Reimbursement Arrangements.  Employers fund an account, which reimburses employees’ and their dependents’ qualifying medical expenses.

What are the new HRA options?

Employers may offer either an Individual Coverage HRA or an Excepted Benefit HRA to a class of employees – it cannot offer both options to the same group.

An Individual Coverage HRA has the following attributes:

  • Participants must enroll in individual health insurance coverage or Medicare.
  • The HRA can reimburse medical insurance premiums, medical care expenses, or both, without an annual limit.
  • Unused amounts will roll over into the next plan year.
  • Employees must be able to opt-out and waive future reimbursements each plan year.
  • Employees can participate in a Health Flex Savings Account and the Individual Coverage HRA.
  • Employers must offer the HRA to a minimum class size of employees on the same terms and conditions.

By comparison, an Excepted Benefit HRA offers the following:

  • Participants must have the opportunity to enroll in the employer’s group plan, but the participants are not required to enroll.
  • The HRA can reimburse medical care expenses, plus premiums for only excepted benefit coverage, like stand-alone dental coverage, up to $1,800 for the 2020 plan year.
  • Unused amounts will roll over into the next plan year.
  • The employer must offer the same benefit to all similarly situated employees.

Interested in learning more?

These new plans touch on a complex web of laws including tax, health and welfare, and labor laws.  In addition, please remember that changes to employees’ health benefits must be negotiated, and these new policies require a notice period before any negotiated changes would take effect.  If your agency is interested in learning more about these new HRA benefits, LCW is available to help assess your Agency’s long-term labor relations and benefits coverage strategies.