Yes, in most cases, a Health Reimbursement Arrangement (HRA) is considered a COBRA-eligible group health plan—which means that when an employee experiences a qualifying event (like termination or a reduction in hours), they must be offered the option to continue their HRA coverage through COBRA.
This applies to:
-
Traditional HRAs offered alongside a group health plan
-
Standalone HRAs that qualify as a group health plan under federal rules
-
ICHRAs, which reimburse premiums for individual coverage
💵 How Does COBRA Pricing Work for an HRA?
If an employee elects COBRA for the HRA, the employer can charge them up to:
-
102% of the value of the HRA, which includes the cost of the benefit plus a 2% administrative fee
But here’s the catch: HRAs don’t have traditional premiums, so the employer must determine the “cost” of the HRA coverage using a reasonable actuarial method or past claims experience. This cost is usually based on:
-
The amount of funds made available to the employee for the plan year, or
-
The average claims reimbursement value for similar employees
For example, if an employee had $2,000 available in their HRA:
-
The monthly COBRA premium might be calculated as $2,000 ÷ 12 = $166.67
-
Plus 2% admin fee = $170/month
Employers may also limit access to only the remaining balance in the account at the time of COBRA election, depending on how the plan is structured.
🔍 Important Notes:
-
If the employee already spent their full HRA balance before leaving, they may not see value in electing COBRA for the HRA.
-
Employers must provide a COBRA election notice that clearly explains the option to continue the HRA and any restrictions.
-
QSEHRAs are not COBRA-eligible because they are not considered group health plans.