Traditional Group HRAs, also known as Integrated HRAs, are employer-funded reimbursement arrangements that are offered alongside ACA-compliant group health plans. These HRAs help lower employees’ out-of-pocket medical costs by reimbursing eligible IRS Section 213(d) expenses such as deductibles, coinsurance, copays, and other cost-sharing amounts.
Traditional HRAs cannot reimburse individual health insurance premiums and cannot be offered on a standalone basis. They must be paired with an ACA-compliant group medical plan to meet federal ACA market requirements.
This page provides a complete overview of how Traditional Group HRAs work, ACA integration rules, plan design options, and common compliance considerations.
What a Traditional Group HRA Is
A Traditional Group HRA is an employer-funded reimbursement allowance that functions as part of the employer’s group health plan strategy. Key characteristics include:
- Paired with employer-sponsored group health insurance
- The HRA is offered in conjunction with the group medical plan. Employees may elect or waive either or both of the plans offered, but employers must offer the HRA together with an ACA-compliant group health plan.
- Reimburses IRS Section 213(d) medical expenses
- Traditional HRAs generally reimburse out-of-pocket medical expenses such as deductibles, copays, and coinsurance. They cannot reimburse individual health insurance premiums.
- Employer-funded only
- Employees cannot contribute. The employer pays reimbursements when claims are incurred and substantiation is provided.
- Employer-controlled with flexible plan design
- Employers determine allowance amounts, eligible expense categories within Section 213(d), rollover rules, eligibility rules, funding frequency, and whether to use a TPA for administration. These decisions give employers significant flexibility to tailor the HRA to their plan strategy and budget.
Why HRAs Must Be Integrated with a Group Health Plan (ACA Rules)
Stand-alone HRAs violate ACA market reform requirements, because:
- Annual dollar limits are prohibited
- HRAs inherently cap benefits at the employer-defined allowance, which counts as an annual dollar limit – and is not in compliance with ACA’s prohibition on annual maximums.
- Preventive care must be covered at 100 percent
- A standalone HRA cannot satisfy the ACA requirement to cover certain preventive services without cost-sharing.
- Minimum essential coverage (MEC) and minimum value requirements
- An HRA alone cannot meet MEC or MV.
- Therefore, a Traditional HRA must be tied to an ACA-compliant group plan.
- Employer obligation vs. employee choice
- Employers must offer the HRA only in combination with an ACA-compliant group medical plan.
- Employees may waive the medical plan and still receive the HRA.
Integration requirements apply to the employer’s offering, not the employee’s election.
How Traditional Group HRAs Work
Traditional HRAs follow the same foundational mechanics as all HRAs but are tied specifically to the employer’s group health plan:
- Employer designs allowance amounts
- May set different HRA amounts for self-only vs. family tiers
- Allowances typically mirror plan deductible or cost-sharing exposure, but varies by the employer’s plan design
- Employer defines eligible expenses
- Must fall under IRS Section 213(d)
- Cannot include premiums for individual or family plans
- Employee incurs eligible medical expenses
- Must be within the HRA plan year and substantiated with documentation.
- Employee submits substantiation to the employer or HRA TPA
- EOBs, receipts, itemized statements
- Must strictly comply with IRS requirements
- Employer reimburses up to the allowance
- HRAs are not cash-out accounts. Only eligible expenses are reimbursed.
- Rollover policies vary by employer
- Employers may allow HRA balances to carry over to the next plan year (full, partial, capped, or none).
HRA Uses
Traditional HRAs are highly versatile, allowing employers to tailor reimbursement strategies to match their group health plan design, budget, and workforce needs. Employers commonly use the following approaches:
- Help employees fund their deductibles
- Reimburse the first layer of deductible expenses (for example, the first $1,000 of a $3,000 deductible) or reimburse the full deductible amount.
- Post-deductible reimbursement
- Reimburse only after employees meet a specified threshold.
- Examples:
- Employer reimburses after the employee pays the first $1,500 of benefits
- Employer reimburses only after the plan’s full deductible is met
- This design works well for employers wanting to preserve cost-sharing incentives while still offering support.
- Coinsurance HRA
- Employer reimburses a percentage of cost-sharing, such as 50 percent of coinsurance up to a defined maximum.
- Out-of-pocket maximum support
- Employer funds HRA dollars specifically to help employees meet their annual OOP maximum. This approach provides strong protection for high utilizers.
- Targeted expense reimbursement
- Employer limits the HRA to certain categories, such as:
-
-
- Deductible only
- Post-deductible expense only
- Inpatient hospitalization
- Pharmacy expenses
- A defined subset of IRS Section 213(d) expenses
- This design keeps costs predictable while aligning with employer priorities.
-
Coordination with FSAs and HSAs
Traditional HRAs may be offered alongside other account-based plans, but special rules apply:
FSAs
- Employers must coordinate plan design to avoid duplicate reimbursements
HSAs
- If employees want to remain HSA-eligible, the HRA must be structured as a limited-purpose HRA (e.g., dental and vision only).
Compliance Requirements for Traditional HRAs
Traditional HRAs are group health plans and must comply with:
ERISA
- Written plan document and SPD
- Claims procedures
- Fiduciary duties and disclosures
ACA Integration Requirements
- Must be offered with an ACA-compliant group health plan
- Cannot include annual dollar limits except those inherent to the HRA
- Preventive services requirement satisfied through integration
Section 105(h) Nondiscrimination
Cannot favor highly compensated individuals in eligibility or benefits. Testing is required.
HIPAA Privacy and Security
Strict protections for medical information and substantiation data.
COBRA
Applies to Traditional HRAs. COBRA premiums are often based on:
- the maximum annual HRA allowance, or
- the amount available at the time of qualifying event.
PCORI Fees
ACA’s fees to fund the Patient Centers Outcomes Research Institute.
IRS Substantiation Requirements
EOBs, receipts, and itemized statements must verify all reimbursable expenses.
Advantages and Limitations
Advantages
- Predictable budgeting for employers; employers can structure plan to keep unused dollars at the end of the plan year.
- Lower employee out-of-pocket costs
- Flexible design options
- Supports HDHP strategies (caution, may jeopardize HSA-contribution eligibility)
- Enhances plan competitiveness without increasing premiums
Limitations
- Requires the employer to offer an ACA-compliant group plan alongside the HRA
- Administrative complexity
- Employer bears claims liability
- Must coordinate with FSAs and HSAs
- Subject to strict substantiation and ERISA requirements, including fiduciary responsibility.