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Proposed Regulations Expand Employers’ Use of HRAs

On Behalf of | Nov 1, 2018 |

HHS, DOL and IRS (the “Agencies”) have jointly issued proposed regulations intended to expand the use of health reimbursement arrangements (“HRAs”) by employers.

Background.  HRAs are employer-funded, account-based group health plans that reimburse up to a fixed-dollar amount of medical expenses. The proposed regulations are a result of Executive Order 13813, which directed the Agencies to consider proposing rules to promote the use of HRAs, expand employers’ ability to offer HRAs to their employees, and permit HRAs to be used with non-group health coverage.

The Agencies’ prior guidance ( i.e., IRS Notice 2013-54 and DOL Technical Release 2013-01): (i) expressly prohibited the use of an HRA or other employer-provided funds to pay or reimburse premiums for insurance purchased in the individual insurance market; and (ii) required that HRAs for active employees be integrated with another group health plan to satisfy the ACA’s market reform requirements. The Agencies’ reasoning for the latter requirement was that a stand-alone HRA failed to satisfy the following two ACA market reform provisions:(i) the prohibition on lifetime and annual dollar limits on essential health benefits; and (ii) the requirement to provide certain preventive services without cost-sharing.

Proposed Regulations. The proposed regulations would generally leave intact the HRAs permitted under the prior guidance and authorize employers to offer two new types of HRAs:

  • An individual health insurance premium reimbursement HRA, provided the following requirements are met:
    • An employer can offer the individual HRA option only if it does not offer another major medical group health plan to the same class of employees.
    • The individual HRA option must be offered on the same terms to all employees in the same class.
    • An employer must substantiate an employee’s enrollment in individual health coverage for each month the employee is covered by the HRA.
    • Written notice is provided to participants and eligible employees at least 90 days before the beginning of each plan year regarding the effect of the HRA on their eligibility for ACA premium tax credits.
    • Employees must be able to elect to opt out of the HRA at least annually so they may maintain eligibility for an ACA
  • An excepted benefit HRA that generally allows up to $1,800 per year, as indexed ( plus rollover amounts) for reimbursement of medical expenses, provided the following requirements are met:
    • The HRA is offered only to employees who are eligible to participate in the employer’s major medical group health plan. NOTE: HRA participants are not required to enroll in the other group health plan in order to be eligible for the excepted benefit HRA.
    • The HRA cannot reimburse premiums for individual health insurance coverage or Medicare.
    • The HRA must be made available on the same terms to similarly situated individuals. The Agencies do not expect these rules to be applicable until plan years beginning on or after January 1, 2020.

The Proposed Regulations are available by clicking here