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Premium Reimbursement Arrangements

Posted on July 8th, 2020

Premium Reimbursement Arrangements (PRAs) can generally be described as tax-free programs which are offered by employers to reimburse employees for health insurance coverage they obtain on their own. Below is a summary of the most common PRAs.

Individual Coverage Health Reimbursement Arrangements (ICHRAs)

ICHRAs may be offered by employers of any size. ICHRAs may reimburse employees for individual major medical or Medicare premiums. Employers may not offer employees the choice between a traditional group health plan or an ICHRA; however, employers may offer one class of employees a traditional group health plan and another class of employees an ICHRA.

Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs)

QSEHRAs may only be offered by employers who are not subject to the Employer Mandate. QSEHRAs may reimburse employees for any type of minimum essential coverage that is obtained outside of their employer. An employer cannot offer any type of group health plan to employees when offering a QSEHRA.

Retiree Health Reimbursement Arrangements (Retiree HRAs)

Retiree HRAs may be offered by any size employer who wants to provide benefits to former employees. Retiree HRAs most commonly reimburse Medicare premium expenses, but they can also reimburse individual major medical expenses for pre-65 retirees.

Medicare Primary Health Reimbursement Arrangements (Medicare Primary HRAs)

Medicare Primary HRAs may be offered as an alternative to the group health plan, but only if these requirements are met:

  • Medicare must be the primary payer if the employee were enrolled in the group health plan; and
  • The employer must offer a group health plan with minimum value; and
  • Eligible employees must be enrolled in Medicare Parts A and B; and
  • Premium reimbursements must be limited to employees enrolled in Medicare Parts A and B or D; and
  • Reimbursements are limited to Medicare Part B and D premiums or premiums for excepted benefits, including Medicare Supplement premium expenses.

Excepted Benefit Health Reimbursement Arrangements (EBHRAs)

EBHRAs may be offered by employers of any size. Reimbursements are limited to short-term medical premiums, COBRA premiums and premiums for excepted benefits, such as dental and vision plans.

Other restrictions may apply to the above arrangements so it’s always best to consult with a benefits expert.

 

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