3 Ways to Supplement HRA With Group Health Insurance (2026)

TL;DR

Employers can supplement group health insurance with three types of HRAs: a Group Coverage HRA (GCHRA) to reimburse out-of-pocket costs, an Excepted Benefit HRA (EBHRA) to cover gaps like dental and vision, or an Individual Coverage HRA (ICHRA) offered to a separate employee class alongside the group plan. Each option follows different rules around eligibility, contribution limits, and what expenses qualify for reimbursement.

With average family premiums hitting $26,993 in 2025 and employer health costs projected to rise 9.5% in 2026, group health insurance alone often leaves employees exposed to significant out-of-pocket spending. Employers are responding by layering Health Reimbursement Arrangements on top of their existing group plans to close coverage gaps, control costs, and offer more personalized benefits.

This guide explains the three ways to supplement an HRA with group health insurance, the compliance rules for each, and how to decide which path fits your workforce.

Schedule a free consultation to see if an HRA supplement strategy is right for your team.

Why Employers Are Adding HRAs to Group Health Plans

The math behind supplementing group health insurance with an HRA is straightforward. As premiums rise, many employers shift to high-deductible health plans (HDHPs) to keep monthly costs manageable. But higher deductibles mean employees pay more before insurance kicks in. An HRA bridges that gap with tax-free employer dollars.

Beyond deductible relief, several workforce trends push employers toward HRA supplementation:

• Remote and multi-state teams that can’t access a single group plan’s provider network effectively
• Mixed workforces with full-time, part-time, and seasonal employees who have very different coverage needs
• Cost predictability, since HRA contributions are fixed amounts the employer controls each year
• Retention pressure, where richer total benefits packages help compete for talent without absorbing another double-digit premium increase

Mercer’s analysis of over 1,700 employers projects total health benefit cost per employee will rise 6.5% on average in 2026, the highest increase since 2010. That cost pressure is the engine driving supplemental HRA adoption. For employers exploring options beyond traditional group coverage, there are several alternatives to group health insurance worth understanding.

Three Types of HRAs That Supplement Group Health Insurance

Not all HRAs work the same way alongside a group plan. The differences matter for compliance, eligible expenses, and which employees can participate.

Group Coverage HRA (GCHRA)

The GCHRA, sometimes called an integrated HRA, is the most direct way to supplement group health insurance with an HRA. It reimburses employees for healthcare expenses their group plan doesn’t fully cover, things like deductibles, copayments, and coinsurance.

Key rules:

• Employees must be enrolled in the employer’s group health plan to participate
• The GCHRA cannot reimburse insurance premiums of any kind (this is the “double-dipping” prohibition, explained below)
• There is no cap on how much the employer can contribute
• The most common use case is pairing an HDHP with a GCHRA to cushion the higher deductible

Think of the GCHRA as a companion benefit that only works inside the employer’s existing group plan. It doesn’t replace anything. It just softens the blow of cost-sharing. For a broader comparison of group versus individual coverage mechanics, see this group insurance vs. individual insurance breakdown.

Excepted Benefit HRA (EBHRA)

The EBHRA is a newer type of employer-funded account that also supplements group health insurance, but with a critical difference from the GCHRA: employees do not need to be enrolled in the employer’s group plan to participate. The employer must offer a group plan, but enrollment is not required.

Key rules:

• Can reimburse copayments, deductibles, dental, vision, short-term insurance, and COBRA premiums
• Cannot reimburse individual health insurance premiums
• The annual employer contribution cap is $2,150 in 2025, rising to $2,200 in 2026
• Available to all employer sizes

The EBHRA is useful for covering gaps outside major medical, especially for employees who might decline the group plan but still want help with dental, vision, or other qualifying expenses. The contribution cap makes it a lighter-touch supplement compared to the GCHRA’s unlimited funding.

For a more detailed look at how EBHRAs compare to ICHRAs, this ICHRA vs. EBHRA comparison covers limits, eligible expenses, and when each makes sense.

ICHRA Alongside Group Health Insurance (Hybrid Model)

The Individual Coverage HRA (ICHRA) works differently from the other two. Instead of supplementing the same group plan, an ICHRA replaces the group plan for a specific class of employees while the rest of the workforce stays on the group plan.

This hybrid approach is increasingly popular. ICHRA adoption has grown roughly 1,000% since 2020, with an estimated 800,000 people using ICHRA benefits to purchase individual health insurance as of 2026.

Key rules:

• Different employee classes receive different benefit types (ICHRA for one class, group plan for another)
• No individual employee can be given a choice between the ICHRA and the group plan within the same class
• Minimum class size requirements apply when both ICHRA and group coverage are offered simultaneously
• The ICHRA has no contribution cap, so employers can set allowances as high or low as they want
• Employees receiving ICHRA must maintain individual health insurance coverage or Medicare

Common hybrid scenarios:

• Headquarters staff on the group plan, remote or out-of-state workers on ICHRA
• Full-time employees on the group plan, part-time workers on ICHRA
• Existing employees grandfathered into the group plan, new hires offered ICHRA (using the new-hire rule)

A professional services firm with 150 employees, for example, might keep salaried headquarters employees on the group plan while offering hourly and remote employees ICHRA instead. Because the firm has more than 100 employees, the ICHRA class must include at least 15 people (10% of the total workforce) to meet minimum class size requirements.

For guidance on structuring these classes, this employee class design guide walks through the IRS-approved categories.

Side-by-Side Comparison: GCHRA vs. EBHRA vs. ICHRA Hybrid

This comparison is the fastest way to narrow down which approach to supplement group health insurance with an HRA fits your situation. The GCHRA and EBHRA layer on top of an existing group plan. The ICHRA hybrid runs alongside it for a different segment of employees.

Key Compliance Rules When You Supplement an HRA with Group Health Insurance

Each HRA supplement path has specific compliance requirements. Getting these wrong can trigger IRS penalties or ACA violations.

No Double-Dipping with GCHRA

The GCHRA cannot reimburse insurance premiums. Since the group plan premiums are already paid with pre-tax dollars through payroll deduction, using tax-free GCHRA funds to pay those same premiums would create a double tax benefit. The IRS does not allow that.

No Choice Within a Single Employee Class (ICHRA Hybrid)

When offering both ICHRA and group health insurance, each employee class must receive one consistent benefit. You cannot let employees in the same class pick between the ICHRA and the group plan. The assignment is made at the class level by the employer.

Minimum Class Size Requirements

These apply only when at least one class gets a group plan and another gets ICHRA:

• Fewer than 100 employees: minimum 10 employees per ICHRA class
• 100 to 200 employees: minimum 10% of total workforce per class
• More than 200 employees: minimum 20 employees per class

If every class receives an ICHRA (no group plan offered), minimum class size rules do not apply.

The New-Hire Rule

ICHRA includes a new-hire provision that lets employers offer new employees an ICHRA while keeping existing employees on the traditional group plan. This is useful for employers who want to gradually phase out group coverage without disrupting current enrollees.

ACA Affordability Testing

Applicable large employers (ALEs) using ICHRA must test affordability at the individual employee level using age-rated local premiums. The 2026 threshold is 9.02% of household income. This testing can be complex, which is why many employers work with a third-party administrator or use the federal poverty line safe harbor to simplify calculations.

For a deeper look at ACA reporting obligations when offering ICHRAs, see this ACA reporting and audit guide.

Which Approach Is Right for Your Business?

The right way to supplement group health insurance with an HRA depends on your workforce composition, budget, and long-term benefits strategy.

Choose GCHRA if you already have a group plan (especially an HDHP) and want to help enrolled employees with deductibles and copays. This is the simplest option and has no contribution limit.

Choose EBHRA if you offer a group plan but want to cover gaps for all employees, including those who decline the group plan. The $2,200 annual cap (2026) limits the employer’s exposure while still providing meaningful help with dental, vision, and other qualifying expenses.

Choose ICHRA hybrid if your workforce is geographically dispersed, has a mix of full-time and part-time employees, or you want to give certain classes access to the individual market while keeping others on the group plan. This is also the right move if you want to transition away from group coverage gradually using the new-hire rule.

Consider the numbers: Among employers offering ICHRA or QSEHRA in 2025, 83% had not previously offered any coverage at all, while 17% transitioned from traditional group insurance. The retention rate is telling too, with 92% of employers who offered an HRA last year continuing to do so.

Schedule a demo to see how SimplyHRA helps employers set up and manage ICHRA alongside existing group plans.

A Note on ICHRA Portability

One argument frequently made in favor of ICHRA is plan portability. Because employees own their individual policy, they can keep it if they leave the employer. That is true, but practitioners note an important caveat: once the employee leaves, they lose the employer contribution and absorb the full age-rated cost themselves. For younger employees on inexpensive plans, portability is genuinely valuable. For older employees with higher premiums, it may be less meaningful in practice. Factor this into your communications when rolling out a hybrid strategy.

Frequently Asked Questions

Can I offer both an HRA and group health insurance to the same employee?

Yes, with the GCHRA and EBHRA. Both are designed to supplement group health insurance with an HRA for the same employees. The ICHRA, however, cannot be offered to the same employee who is on the group plan. ICHRA must go to a different employee class.

What expenses can a GCHRA reimburse?

A GCHRA can reimburse deductibles, copayments, coinsurance, and other out-of-pocket medical expenses. It cannot reimburse insurance premiums of any kind.

Do employees need to enroll in the group plan to use an EBHRA?

No. The employer must offer a group plan, but individual employees do not need to enroll in it (or any other coverage) to use EBHRA funds.

What are the 11 ICHRA employee classes?

The IRS recognizes 11 employee classes for ICHRA: full-time, part-time, salaried, hourly, geographic location, seasonal, union/collectively bargained, employees in a waiting period, foreign nationals, temporary staffing agency workers, and combinations of these categories. For more detail on varying benefits by class, that guide covers the mechanics.

Is there a contribution limit when I supplement an HRA with group health insurance?

It depends on the HRA type. The GCHRA and ICHRA have no employer contribution limits. The EBHRA is capped at $2,200 per employee for 2026.

Can an employee choose between ICHRA and the group plan?

No. When an employer offers both ICHRA and a group plan, each employee class must receive one or the other. No individual can be given the option to pick between them.

How does the new-hire rule work for ICHRA?

The new-hire rule allows employers to offer ICHRA to employees hired after a specific date while keeping existing employees on the group plan. This creates a gradual transition path without forcing current enrollees off their coverage.

Does supplementing group insurance with an HRA affect ACA compliance?

Yes, particularly for ALEs offering ICHRA. Affordability must be tested at the individual level using the lowest-cost silver plan in the employee’s location. GCHRAs and EBHRAs, because they layer on top of the group plan, generally do not create separate ACA affordability issues.