One potentially unintended consequence of the Affordable Care Act (ACA) was the demise of the average health reimbursement account (HRA). Such benefits were seen to violate the ACA prohibitions on annual and lifetime limits, among other things. To retain any HRA offerings, the employer had to integrate the HRA with an existing group health plan otherwise satisfying the ACA’s rules beginning in 2014.
Realizing that this had a detrimental effect on employees of small employers, in particular, Congress created the qualified small employer health reimbursement account (QSEHRA) under the 2016 21st Century Cures Act. The DOL’s final regulations, issued June 13, 2019, take the QSEHRA a step further and essentially opens it up to employers of all sizes, and also adds a limited purpose HRA option, all beginning January 1, 2020.
The first kind of new HRA is the “excepted benefit HRA” that permits employers offering a traditional group health plan the ability to reimburse employees for certain qualified medical expenses, including premiums for vision, dental, and (in certain cases) short-term, limited-duration insurance, up to $1,800.00 (indexed) per year.
The second kind of new HRA is the “individually integrated HRA.” With this plan, an employer is allowed to reimburse employees for premium expenses incurred by the employee for individual health insurance that complies with the ACA’s market rules (for example, vision and dental insurance is not enough) for so long as such health insurance is maintained and substantiated in the course of plan year. Employers may not offer the same employees both an individually integrated HRA and a traditional group health plan at the same time, and there are various rules governing employee classifications to limit any potential health-based discrimination in these mutually exclusive offerings. Also, participants must be given an annual opportunity to opt out or waive future reimbursements since these reimbursements affect subsidy eligibility in the Health Insurance Marketplace.
Also because the individually integrated HRA affects a person’s subsidies, advance special notice of the benefit, its limitations, and its effects are necessary. This must be provided to eligible participants at least 90 days before the start of the plan year, so any employers looking into this option will want to consider it in earnest now. There are no special notice requirements related to the excepted benefit HRA, so it should be a much easier addition to existing benefit structures.
This is an exciting development, though there are many conditions to consider in the 130+ pages of fresh regulations. Employers should consult with their advisors on whether and how these new HRAs could complement benefit offerings.