Changes to Health Reimbursement Arrangements


         A Health Reimbursement Arrangement (HRA) is a plan set up by a business to cover the qualified medical expenses such as prescription medications, physical exams, care from a psychologist or psychiatrist, and more. They are a tax deduction for the employer and tax free for the employee. In our last post, we mentioned that January 2020 would mark a big change in how HRA’s could be administered.

          Next year, a new type of HRA can be offered and used to buy health insurance inside or outside the Affordable Care Act marketplace. Another option that is available applies to companies that continue to offer group health insurance. They can offer an excepted benefit HRA, which would reimburse employees up to $1,800 for qualified medical expenses. If an employee were to decline group coverage and only go with the HRA, they could only use it for expenses, short term insurance and premiums.

          The uses of an HRA are limited by the Internal Revenue Service (IRS). Expenses are only considered qualified if they alleviate or prevent a physical or mental ailment. Employers may choose to exclude other expenses, so it is up to the employee to make sure of what is covered under the arrangement. When considering this area of health and taxes, there are special considerations and other arrangements that can be examined. Our next post will look at these options.

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