Health Reimbursement Arrangements – Summary of Final Rules Employers Need to Know
Two new types of health reimbursement arrangements (HRAs) are sanctioned by final regulations and were published on June 20, 2019.
As a result of an Executive Order issued on Oct. 12, 2017, the Affordable Care Act’s (ACA) tri-governing agencies (Departments of Health and Human Services, Labor and Treasury) were charged with developing regulations to expand existing rules to allow individual premiums to be reimbursed through health reimbursement arrangements. The tri-governing agencies released a set of non-reliance proposed regulations on Oct. 29, 2018, setting forth the framework for two additional types of HRAs:
- Individual-Coverage HRA (IC-HRA): An individually integrated HRA used with individual health coverage obtained via public marketplace or private market
- Excepted Benefit HRA (EB-HRA): A new type of standalone HRA that can be used to pay out-of-pocket medical expenses
As background, an HRA is a self-funded health plan funded strictly with employer dollars. These monies can be used to pay qualified medical expenses. Because an HRA is a health plan, it is generally subject to all of the market provisions of the ACA. By design, an HRA is not compliant with certain aspects of these market provisions.
Beginning in January 2020, employers can choose to offer an HRA integrated with individual coverage HRA (IC-HRA) or an excepted benefit HRA (EB-HRA).
Individual Coverage HRA (IC-HRA):
An HRA integrated with individual coverage, whether obtained through or outside marketplace, is known as an IC-HRA. Individual health coverage also includes Medicare Parts A, B, C and D policies (only permissible if the Medicare secondary payor rules do not apply). Coverage that does not qualify as individual coverage for purposes of an IC-HRA are short-term, limited duration insurance or coverage consisting solely of dental, vision or similar “excepted benefits.”
Excepted Benefit HRA (EB-HRA):
An excepted benefit HRA (EB-HRA), unlike an IC-HRA, can be made available to individuals who are eligible for comprehensive group health coverage. As such, the HRA would not be subject to the ACA market reform rules.
In this type of arrangement, the HRA must provide up to $1,800 in benefits per year (subject to inflationary indexing) to reimburse expenses for excepted benefits. As is true for all HRAs, only qualifying medical expenses can be reimbursed. While, generally, premiums cannot be reimbursed from an EB-HRA other than COBRA premium, excepted benefit premium, such as vision and dental premium, and in limited circumstances, premiums for short term limited duration insurance policies, is permissible. The EB-HRA cannot be an integral part of the group plan and must be made available to all employees of a class. (See Permitted Classes of Employees, )
What does this mean for employers?
These regulations are complex and not only demand significant analysis by employers considering offering these new types of HRAs but also require that much is discerned by the ACA marketplaces, as well as the individual insurance industry. Certainly, additional guidance will be issued, and time will tell how much traction these types of HRAs achieve.