Excepted benefit HRAs and integrated HRAs

This page covers two other designs that sit *next to* a traditional group medical plan: the excepted benefit HRA (EBHRA) and the integrated HRA.

What it is

An excepted benefit HRA is described in 26 CFR 54.9831-1(c)(3)(viii). Because it is an excepted benefit, it is not subject to the Affordable Care Act market reforms that apply to non-excepted group health plans. In exchange, it accepts a set of conditions:

• The employer must also offer the employee a non-excepted group health plan. The employee does not have to enroll in that plan in order to use the EBHRA.
• The amount newly made available for the plan year is capped. IRS Revenue Procedure 2025-19 sets that cap at $2,200 for plan years beginning in 2026. Revenue Procedure 2026-24 sets it at $2,250 for plan years beginning in 2027. Unused amounts may be carried over under the plan's terms; a carryover does not count against the next year's new-availability limit.
• It generally may not reimburse premiums for individual health insurance, Medicare, or a group health plan, with stated exceptions such as COBRA continuation premiums and premiums for excepted-benefit coverage (for example, dental or vision).
• It must be available on the same terms to all similarly situated employees.

An integrated HRA is a different design. Under the integration rules in 26 CFR 54.9815-2711, an HRA can be integrated with a traditional group health plan when, among other conditions, the HRA is available only to employees who are actually enrolled in other non-HRA group coverage that meets the rule's tests, and the HRA allows the employee to opt out. The integrated HRA then reimburses additional medical expenses — for example, deductibles and copayments — on top of that group coverage. It is not a vehicle for buying individual-market policies. That is what an ICHRA is for.

Who it fits

An EBHRA is often a fit when you already offer, or will offer, a group medical plan and you want a modest employer-funded account that employees can use for eligible expenses, including certain excepted-benefit premiums, whether or not they enroll in the medical plan. An integrated HRA is often a fit when you want to reimburse out-of-pocket medical costs for employees who are enrolled in your group plan, or in other group coverage the rule allows.

An ICHRA or a QSEHRA is the better comparison when the company wants a defined contribution toward individual coverage rather than a traditional group medical plan. A QSEHRA cannot be offered if you offer a group health plan to any employees.

How it works for employers

You adopt a written HRA, set the annual amount (within the EBHRA cap, if that is the design you are using), decide eligibility, and arrange substantiation and reimbursement. Notice requirements apply. The EBHRA must be offered alongside a group medical plan. The integrated HRA must be limited to employees enrolled in the other group coverage the regulation requires, and it must allow a permanent opt-out at least annually.

These arrangements are employer-funded. They are not funded by employee salary reduction the way a health FSA is. We will help you choose the HRA design that matches the medical plan you actually intend to offer, and your tax advisor should confirm the tax treatment.

How it compares

• An EBHRA is a capped, excepted-benefit account next to a group medical plan. Enrollment in that plan is not required.
• An integrated HRA reimburses additional medical expenses for employees enrolled in group medical coverage.
• An ICHRA reimburses individual coverage (and certain Medicare arrangements) for a class of employees, and that class is not also offered a traditional group medical plan.
• A QSEHRA is available only to eligible small employers that offer no group health plan.

Each is a legitimate fit for some companies. The choice starts with whether you are offering a traditional group medical plan at all.