Health reimbursement arrangements (HRAs), health savings accounts (HSAs) and health care flexible spending accounts (HFSAs) are generally referred to as account-based plans. That is because each participant has his or her own account, at least for bookkeeping purposes. Under the tax rules, amounts may be contributed to these accounts (with certain restrictions) and used for health care on a tax-favored basis.
The Patient Protection and Affordable Care Act (ACA) added new requirements that affect HRAs and HFSAs. HSAs generally are not affected by the ACA.
The 21st Century Cures Act (Cures Act) provided a method for certain small employers to reimburse individual health coverage premiums up to a dollar limit through HRAs called “Qualified Small Employer Health Reimbursement Arrangements” (QSE HRAs). This provision was effective on January 1, 2017.
In June 2019, the Department of the Treasury, Department of Labor, and Department of Health and Human Services issued final rules to expand the use of HRAs by removing the prohibition against integrating an HRA with individual health insurance coverage (individual coverage HRA, or ICHRA) and expanding the definition of limited excepted benefits to recognize certain HRAs as limited excepted benefits if certain conditions are met (excepted benefit HRA, or EBHRA). ICHRAs and EBHRAs will be available starting on January 1, 2020.
The chart below describes the main characteristics of these types of accounts and should help you decide which option is the best for your situation.