Health Reimbursement Arrangements

A Health Reimbursement Arrangement (HRA) is an employer-funded group health benefit that provides tax-free reimbursement for qualified medical expenses up to a fixed dollar amount per year. HRAs reimburse medical expenses, which may include monthly premiums and out-of-pocket costs, such as copayments and deductibles. Some employers offer an HRA as an alternative to traditional group health plan coverage. 

With some types of HRAs, you may need to buy a health plan on the individual insurance market. Depending on factors discussed below, you may qualify to buy a health plan through Covered California and receive financial help to lower your costs. 

HRAs and Financial Help

There are different types of HRAs. Two types of HRAs can be used to buy a Covered California health plan with financial help:

1. Individual Coverage Health Reimbursement Arrangement (ICHRA)
2. Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

Your eligibility for financial help with these HRAs depends on whether the HRA offer is considered affordable by federal standards. If the HRA is considered affordable, you won’t be eligible for financial help. If the HRA is considered unaffordable, you will be eligible for a Covered California health plan with financial help, based on your income and other factors. 

ICHRA

• If the ICHRA is affordable: You won’t be eligible for the federal premium tax credit or state subsidy for a Covered California health plan. If you receive financial assistance from Covered California and you have an affordable ICHRA, you may owe money back at tax time.

• If the ICHRA isn’t affordable: You may qualify for financial assistance to help you buy a health plan through Covered California based on your income and other factors. If you decide to buy a Covered California health plan and accept financial help, you must notify your employer that you are opting out of the ICHRA.

QSEHRA

• If the QSEHRA is affordable: You won’t be eligible for the federal premium tax credit or state subsidy for a Covered California health plan.  If you receive financial assistance from Covered California and you have an affordable QSEHRA, you may owe money back at tax time.

• If the QSEHRA isn’t affordable: You may qualify for financial assistance to help you buy a health plan through Covered California based on your income and other factors. But if you are eligible for financial help, you will need to reduce the amount of federal tax credit you take by the amount of your QSEHRA.  You can use the financial help (APTC, a federal tax credit) slider in your online account to do this, or you can call the Covered California Service Center for help. If you do not reduce the amount of financial help from Covered California, you may owe money back at tax time.

Use the HRA Affordability Calculator to see if your HRA offer is considered affordable and to see if you qualify to use financial help with your HRA.   

Your HRA Offer Letter

In most cases, your employer must provide a written notice at least 90 days before the start of the HRA plan year. When you get this notice, be sure to keep it with other important documents. It includes information you will need to determine if your HRA is affordable and enroll in individual coverage.

When to Enroll

If your HRA starts Jan. 1, you can enroll in Covered California insurance or directly with a health insurance company during the annual open enrollment period each Nov. 1 through Jan. 31. For coverage to start on Jan. 1, you will need to enroll in a health plan by Dec. 31. 

If you newly gain access to an HRA at another time of year, you may qualify for a special enrollment period to enroll in or change Covered California health insurance coverage outside of open enrollment.

If You Are Already Enrolled in Covered California

You do not need to change your coverage if you already have a Covered California health plan and you later get an HRA offer from your employer. However, you should use the HRA Affordability Calculator to determine whether your HRA is affordable. The calculator will give you next steps on whether you should change the financial help you may already be receiving.