Health Reimbursement Arrangements Comparison Chart

Karen Hsu

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Health Reimbursement Arrangements Comparison Chart
Updated October 2020
15-Minute Read
10/26/20 Update: Updated for the 2021 EBHRA limit, 2021 Health FSA limit, and 2021 QSE HRA limit.
In June 2019, the Department of the Treasury (Treasury), Department of Labor (DOL), and Department of Health and Human Services (HHS) (collectively, the Departments) published their final rules regarding health reimbursement arrangements (HRAs) and other account-based group health plans. These final rules expand the use of HRAs by removing the prohibition against integrating an HRA with individual health insurance coverage (individual coverage HRA) and expanding the definition of limited excepted benefits to recognize certain HRAs as limited excepted benefits if certain conditions are met (excepted benefit HRA).
The final rules were effective on August 19, 2019, and generally apply for plan years beginning on or after January 1, 2020.
In September 2019, the Internal Revenue Service (IRS) published proposed rules to clarify the way the employer shared responsibility provisions and Section 105(h) nondiscrimination rules apply to HRAs that are integrated with individual health insurance coverage or Medicare.
The chart that follows is designed to help employers understand the differences between a "traditional" HRA, limited purpose HRA, retiree only HRA, Qualified Small Employer HRA, and the two new types of HRAs: the individual coverage HRA and the excepted benefit HRA. It has been updated to include the applicable 2021 limitations that have been released.

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"Traditional" HRA

Limited Purpose HRA

Employer eligibility

Any size employer

Any size employer

Employee eligibility
Any employee who is covered by a group medical plan sponsored by the employer (or if the employer chooses, by the spouse's employer)

Eligibility terms are defined by employer

Retiree only HRA

Qualified Small Employer HRA
(QSEHRA)

Individual Coverage HRA (ICHRA)

Excepted Benefit HRA (EBHRA)

Any size employer

Employers with fewer than 50 full-time / fulltime equivalents that do not offer a group health plan

Any size employer

Any size employer

Retired employees are eligible (a retireeonly plan does not have to meet the medical coverage requirement that a "traditional" HRA must meet)

Employees of employers with fewer than 50 full-time employees (under ACA counting methods) who do not offer group health plans. To be eligible, the employee must show proof of coverage.
Reimbursements are tax-free to the employee if the employee has minimum essential coverage for the month in which the expense is incurred.

An employee who has individual coverage (including Marketplace coverage, student health insurance coverage, catastrophic plans, individual health insurance coverage sold through a private exchange model, and grandmothered individual health insurance coverage). To integrate an ICHRA with Medicare, certain conditions must be satisfied.

Employee must be eligible for the group health plan (but does not need to be enrolled in the group health plan)

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"Traditional" HRA

Limited Purpose HRA

Additional eligibility requirements

Yes, the employer may design the plan to cover whom it wishes as long as it meets the nondiscrimination requirements.

Yes, the employer may design the plan to cover whom it wishes as long as it meets the nondiscrimination requirements.

Retiree only HRA

Qualified Small Employer HRA
(QSEHRA)

Individual Coverage HRA (ICHRA)

Excepted Benefit HRA (EBHRA)

Set by employer, but subject to various laws, including state and local laws (to the extent they aren't preempted by ERISA), Medicare Secondary Payer rules, and contracts governing the employer's obligations, including collective bargaining agreements. In most cases, retiree only plans are exempt from the ACA's market reforms and patient protections.

Employers must offer the QSEHRA to all similarly situated employees. It is acceptable to provide different reimbursement amounts to different employees within the reimbursement limits, if the variance is due to differences in insurance policy prices in which the employees are enrolled.
It is not acceptable to provide different reimbursement amounts to employees based on seniority, employee classifications, job performance, wellness program incentives, or any other type of incentive/reward program.

Employers (who do not offer an ICHRA to all employees) may only offer the ICHRA on different terms to different groups of employees if the groups are one or more of the 11 specifically listed classes of employees listed in the regulations. The regulations also provide minimum class sizes for some of the classes.

Employers must make the EBHRA available under the same terms to all similarly situated individuals (as defined by HIPAA's nondiscrimination regulations) regardless of any health factor.

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"Traditional" HRA

Limited Purpose HRA

Employer contribution limits

Set by employer

Set by employer

Retiree only HRA
Set by employer

Eligible expenses
Section 213(d) medical care expenses

Vision and dental expenses; or limited to spousal or retiree only

Section 213(d) medical care expenses

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Qualified Small Employer HRA
(QSEHRA)

Individual Coverage HRA (ICHRA)

Excepted Benefit HRA (EBHRA)

2021: $5,300 (single coverage) $10,700 (family coverage); indexed annually for inflation

Set by employer

2020/2021: $1,800 (indexed annually for inflation)

Section 213(d) medical care expenses and individual coverage

Section 213(d) medical care expenses. Individual coverage (including Market-place coverage, student health insurance coverage, catastrophic plans, individual health insurance coverage sold through a private exchange model, and grandmothered individual health insurance coverage). If integrated with Medicare, may reimburse premiums for Medicare Part A, B, C, or D, Medigap policies, and other Section 213(d) medical care expenses (subject to the Medicare Secondary Payer rules).

Section 213(d) medical care expenses, excepted benefits' premiums, COBRA, short-term limited duration insurance

©2019 United Benefit Advisors, LLC. All rights reserved.

"Traditional" HRA

Limited Purpose HRA

Section 125 cafeteria plan

No

No

Retiree only HRA
No

FSA compatible

Yes

Yes

Yes

HSA compatible
Yes, if restricted to post-deductible or limited purpose
COBRA
Yes

Yes, if restricted to post-deductible or limited purpose
Yes

Yes, if restricted to post-deductible or limited purpose
No, unless it's the COBRA qualifying event of employer bankruptcy

Qualified Small Employer HRA
(QSEHRA)

Individual Coverage HRA (ICHRA)

Excepted Benefit HRA (EBHRA)

No

Employees'

No

premiums for

individual coverage

off Marketplace can

be run through a

cafeteria plan

No (because

No, if the health FSA Yes

employer cannot

is considered to be a

sponsor other group group health plan

health plan)

(because an

employee cannot be

offered both a

traditional group

health plan and an

HRA integrated with

individual coverage)

Yes, if restricted to individual coverage and post-deductible

Yes, if restricted to individual coverage and post-deductible

Yes, if limited to vision and dental expenses

No

Applies to HRA, but Yes

not to the individual

coverage

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"Traditional" HRA
ERISA Yes

Limited Purpose HRA

Retiree only HRA

Yes

Yes

Qualified Small Employer HRA
(QSEHRA)

Individual Coverage HRA (ICHRA)

Excepted Benefit HRA (EBHRA)

A QSEHRA is

Yes (but ERISA's

Yes

excluded from the

Title I will not apply to

ERISA Title I, Part 7 the individual

group health plan

coverage if it meets

definition. The rest of conditions in the final

ERISA may apply to rule that was issued

QSEHRAs, although by the Treasury,

this issue remains

DOL, and HHS)

undetermined by an

administrative agency

or court.

However, starting on January 1, 2020, individual coverage selected by the employee in the individual market and reimbursed by a QSEHRA will not be treated as a part of any employee welfare benefit plan for purposes of ERISA's Title I, if the QSEHRA meets conditions in the final rule that was issued by the Treasury, DOL, and HHS.

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"Traditional" HRA

Limited Purpose HRA

Carryover allowed

Yes

Yes

Section 105(h) Nondiscrimination rules

Yes

Yes

Retiree only HRA
Yes
Yes

Minimum essential coverage

Yes

No

Not applicable

Affordable for ACA purposes

Possible

No

Minimum value for ACA purposes

Possible

No

Not applicable Not applicable

Qualified Small Employer HRA
(QSEHRA)

Individual Coverage HRA (ICHRA)

Excepted Benefit HRA (EBHRA)

Yes

Yes

Yes

Yes

Yes, but subject to

Yes

ICHRA rules on class

categories, minimum

class size, and limits

on reimbursement

amount differences

Not applicable

Yes

No

because an

applicable large

employer (ALE)

cannot offer a

QSEHRA

Not applicable

Possible

No

because an ALE

cannot offer a

QSEHRA

Not applicable because an ALE cannot offer a QSEHRA

An affordable ICHRA No is treated as providing minimum value

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"Traditional" HRA

Limited Purpose HRA

HIPAA privacy rules

Yes

Yes

10/9/2019 Updated 10/26/2020

Retiree only HRA
Yes

Qualified Small Employer HRA
(QSEHRA)

Individual Coverage HRA (ICHRA)

Excepted Benefit HRA (EBHRA)

Yes

Yes

Yes

This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.

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