Explanation of Guidance on HRAs, Health FSAs and Certain
Other Employer Healthcare Arrangement Options
By Larry Grudzien
Attorney-At-Law
September 16,
2013
On Friday, September 13, the Departments of Labor, Treasury
and Health and Human Services provided guidance on the application of certain
provisions of the Affordable Care Act (Act) on health reimbursement
arrangements (HRAs), certain health flexible spending arrangements (Health
FSAs) and employee assistance programs (EAPs).
The following reviews this guidance:
1. Since HRAs are group health plans under ERISA, they must
meet the market reforms under the Act.
2. HRAs integrated with a group health plan will be treated
as complying with both the annual dollar limit prohibition and the preventive
services requirement if certain conditions are met, as explained below.
3. An HRA can be integrated with the group health plan of
the employer or of another employer.
4. An HRA used to purchase individual market coverage is
treated as not integrated for the annual dollar limit prohibition or the
preventive services requirements.
5. For an HRA to be except from these requirements it must
qualify as either a retiree medical plan or an "excepted benefit"
under HIPAA.
6. Amounts made available under an HRA that is integrated
with an eligible employer sponsored plan can be used for determining
affordability or minimum value, but not both.
7. If an HRA is integrated with a plan offered by another
employer for purposes of the market reforms, such an HRA cannot count toward
the affordability or minimum value requirement of the plan offered by the other
employer.
8. An HRA will be treated as integrated with another group
health plan for purposes of the annual dollar limit prohibition and the
preventive services requirements if the requirements of at least one of two
integration methods, Minimum Value Not Required and Minimum Value Required, are
met
Minimum Value Not Required:
This method is met if:
a) the
employer offers a group health plan (other than the HRA) to the employee that
does not consist solely of excepted benefits;
b) the
employee receiving the HRA is actually enrolled in a group health plan (other
than the HRA) that does not consist solely of excepted benefits, regardless of
whether the employer sponsors the plan (non-HRA group coverage);
c) the HRA is
available only to employees who are enrolled in non-HRA group coverage,
regardless of whether the employer sponsors the non-HRA group coverage (for
example, the HRA may be offered only to employees who do not enroll in the
employer's group health plan but are enrolled in other non-HRA group coverage,
such as a plan maintained by the employer of the employee's spouse);
d) the HRA is
limited to reimbursement of one or more of the following-co-payments,
co-insurance, deductibles, and premiums under the non-HRA group coverage, as
well as medical care (as defined under Code Section 213(d)) that does not
constitute essential health benefits; and
e) under the terms
of the HRA, an employee (or former employee) is permitted to permanently opt
out of and waive future reimbursements from the HRA at least annually and, upon
termination of employment, either the remaining amounts in the HRA are
forfeited or the employee is permitted to permanently opt out of and waive
future reimbursements from the HRA.
This opt-out feature is required because the benefits
provided by the HRA generally will constitute minimum essential coverage and
will therefore preclude the individual from claiming a premium tax credit.
Minimum Value Required. This method is met if:
a) the employer
offers a group health plan to the employee that provides minimum value;
b) the employee
receiving the HRA is actually enrolled in a group health plan that provides
minimum value, regardless of whether the employer sponsors the plan (non-HRA MV
group coverage);
c) the HRA is
available only to employees who are actually enrolled in non-HRA MV group
coverage, regardless of whether the employer sponsors the non-HRA MV group
coverage (for example, the HRA may be offered only to employees who do not
enroll in the employer's group health plan but are enrolled in other non-HRA MV
group coverage, such as a plan maintained by an employer of the employee's
spouse); and
d) under the terms
of the HRA, an employee (or former employee) is permitted to permanently opt
out of and waive future reimbursements from the HRA at least annually, and,
upon termination of employment, either the remaining amounts in the HRA are
forfeited or the employee is permitted to permanently opt out of and waive
future reimbursements from the HRA.
9. An employee who ceases participation in a group health
plan may use any remaining amounts credited in the HRA while integrated after
being covered without causing the HRA to fail to comply with the market
reforms.
10. If the requirements of Minimum Value Required
Integration Method are met, an HRA integrated with that group health plan will
not be treated as imposing an annual limit in violation of the annual dollar
limit prohibition, even if that group health plan does not cover a category of
essential health benefit and the HRA is available to cover that category of
essential health benefits and limits the coverage to the HRA maximum benefit.
11. If a Health FSA offered by an employer does not qualify
as excepted benefits, the Health FSA generally is subject to the market
reforms. If they are not integrated with a group health plan, they will fail
the preventive care requirements. There will be an exception for Health FSAs
from the annual dollar limit prohibition that is offered under a cafeteria
plan.
12.The above exception will not apply to HRAs that could be
treated as Health FSAs.
13. An Employee assistance program will be considered to be
an excepted benefit, but only if the program does not provide significant
benefits in the nature of medical care or treatment. Since this term is not
defined in the guidance, employers may use a reasonable, good faith
interpretation of whether an EAP provides such care or treatment, until further
guidance is released.
14. Premiums for coverage purchased on the marketplace
cannot be reimbursed under a premium only plan under Code Section 125 for tax
years beginning after December 31, 2013. For any premium only plans that have a
noncalendar plan years as of September 13, 2013, this restriction will not
apply before the first plan year beginning after December 31, 2013. Because of
this, any individual may not claim a premium tax credit for any month in which
he or she was covered by a qualified health plan purchased though a state
marketplace and reimbursed under a premium only plan under Code Section 125.
This provision was added because several state marketplaces
established before 2013 allowed individuals to be reimbursed for individual
health insurance premiums purchased through a state marketplaces from premium
only plan under Code Section 125.
These provisions apply for plan years beginning on or after
January 1, 2014, but may be applied for all prior periods.
For More Information:
If you have any comments or questions regarding any of above
information, please do not hesitate to call Robert Slayton at 630-779-1144 or
Larry Grudzien at (708) 717-9638
