Does COBRA apply to Health Reimbursement Arrangements (HRAs)?

Posted by Rick Lindquist on Sun, Feb 07, 2010 @ 02:30 PM

Yes. Health Reimbursement Arrangements (HRAs) are subject to COBRA requirements (for employers with over 20 employees), meaning employers must allow employees and/or dependents to continue their HRA coverage after termination if they pay the cost themselves. COBRA and HRAs

HRAs, like other group health benefit plans, are subject to the continuation requirements of COBRA. Employers must give terminated employees the option to continue HRA coverage for a period after termination, and may charge the terminated employee up to 102% of the cost of this coverage.

If the participant participated in both the HRA and a group health insurance plan while employed, the employer may require that the terminated participant elect COBRA coverage for the group plan in order to elect COBRA for the HRA. In other words, the employer may give the terminated participant the options of electing: (a) no COBRA, (b) COBRA coverage only for the group health insurance, or (c) COBRA coverage for both the group health insurance and the HRA, but need not give the participant the option of electing COBRA only for the HRA.

For most purposes, terminated participants who have elected COBRA coverage are treated exactly like current, similarly situated employees. They should continue to receive HRA allowances and have the ability to submit new claims just like a current employee. If the HRA plan for current employees is changed or terminated, the change affects any current COBRA participants in the same way. The key difference is that the employer may charge the terminated participant and/or dependents for the cost of their coverage.

In general, an employer may charge a terminated employee and/or dependents monthly up to 102% of the cost of the coverage for a similarly situated individual in the plan. The IRS has not released specific guidelines for calculating the cost of an HRA plan in order to determine COBRA premium, except that the determination may not depend on the participant’s current HRA balance.

Note: This should not be taken as legal or tax advice.

Tags: health reimbursement arrangement, hra, Cobra

Comments

can hras fund state risk pool insurance?

Posted @ Friday, April 06, 2012 4:17 PM by larry

can hras be used to fund state risk insurance

Under the IRS tax code, health insurance premiums (including premiums for health insurance provided through state risk insurance risk pools) are eligible for reimbursement from an HRA.

Posted @ Friday, April 06, 2012 4:17 PM by Rick Lindquist

I was employed and had health coverage for my family with an HRA. I lost my job, but COBRA'd my spouse, who incurred a claim and we are having resistance collecting the $1300 balance that was in my HRA. What should the impact be on the HRA if the employee him/herself does not elect COBRA, but selectively has a spouse or other dependent on COBRA?

Posted @ Friday, April 06, 2012 4:20 PM by Bubba

Hi Bubba,

it depends on how Cobra HRA eligibility is determined. If it is based on you electing family coverage, you may have lost access to the HRA when your spouse elected single coverage.

Posted @ Friday, April 06, 2012 4:20 PM by Zane Benefits

I recently left my company which has a major medical plan with an HRA. The company deposits $1200 into the HRA each year to cover employee out of pocket costs. I had approximately $300 left in mine and am being told this money was forfeited when I was terminated and that even if I elect Cobra the money I will have no HRA since that is only funded for current employees. Is this legal?

Posted @ Friday, April 06, 2012 4:21 PM by CJ

Hi CJ - It depends on how many employees your company has. COBRA is only required on HRAs for companies with 20 or more employees.

Posted @ Friday, April 06, 2012 4:21 PM by Zane Benefits

Not sure if anyone is still following this spread, but I am the admin for a plan that is adopting an HRA where the company RAISED the individual deductible from 1,000 to 1,500 BUT will REIMBURSE employee for any amount of the deductible utilized over the 1,000. The plan saved us a fair amount on premiums, but the risk is there that the total usage across the firm could erase the savings and cost us money. QUESTION: since I only charge the COBRA enrolees the smaller premium, do I need to compensate them for their out of pocket exp after they reach the 1,000 mark? If so, in reality, they should be paying a rate based on the 1,500 deductible not the 1,000 deductible we are paying. Is that legal for me to do?

Posted @ Friday, April 06, 2012 4:22 PM by Mark ROhde

Hi Mark - I am not sure I fully understand the question.

What do you mean by smaller premium?
If the question is, "can you charge for access to the HRA?", the answer is yes.

QUESTION: since I only charge the COBRA enrolees the smaller premium, do I need to compensate them for their out of pocket exp after they reach the 1,000 mark? If so, in reality, they should be paying a rate based on the 1,500 deductible not the 1,000 deductible we are paying. Is that legal for me to do?

Posted @ Friday, April 06, 2012 4:23 PM by Rick Lindquist

My friend wasn`t covered and now is really having big problems with getting medical help..I always told him how important it was to be covered.

Posted @ Friday, April 06, 2012 4:25 PM by cobra insurance

I want to make sure that I have this straight, Rick. Let's say that my employer group client increases its deductible from 1000 to 5000. The employee pays the first 1000 of charges and the employer pays the next 4000 via an HRA plan until the employee has reached the insurance plan's $5,000 deductible.

I understand from your post that the employer must allow its former employee to participate in the HRA due to COBRA regs. What I'm not clear about is the HRA benefit payment for the $4,000 of charges that the former employee incurs after the 1000 deductible. Is the former employee responsible for that is the employer responsible for that? Please explain. Thanks.

Posted @ Friday, August 10, 2012 4:28 PM by Robert Lehrer

Hi Robert,

Can you be more specific with your example?

How many employees does the company have? When did the employee terminate (i.e. before or after raising the deductible)? Etc.

Posted @ Sunday, August 12, 2012 2:33 PM by Rick Lindquist

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