Trump Administration ready to expand HRA options for employers

A jointly-issued proposed rule from the Department of Labor, Department of the Treasury,  and the Department of Health and Human Services appears to be the first step to expand HRA options to give employers more flexibility in their use of HRAs. The document is titled, Health Reimbursement Arrangements and Other Account-Based Group Health Plans. It is available on the National Register at this link.

Issued on October 29, 2018, the proposed rules come in response to Section 4 of Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States (EO 13813).

The proposed rule does this by introducing two ‘new’ HRA options: Integrated and Excepted Benefit.

(Continues below).

Integrated HRAs (proposed)

Currently, employers under the Applicable Large Employer (ALE) mandate to provide group health insurance to employees cannot provide an HRA to reimburse employees for nongroup health insurance premiums.

In late 2016, an exception was made (via the Cures Act) for Qualified Small Employers (QSE) with the restoration of stand-alone HRAs to employers with fewer than 50 employees (the QSEHRA).

The new guidelines, if adopted, will essentially allow employers of any size to reimburse employees for individual health insurance through an HRA. This will make providing health care assistance for employees more affordable to employers.

Here are a few of the rules proposed for the new Integrated HRA:

• Eligible employers may offer no group health plan: An eligible employer may not offer any group health plan to the same class of employees. Separate classes of employees may include full-time vs. part-time or active vs. retired.
• Same-terms requirement:  An employer must offer the HRA with the same terms to all employees in a particular class.
• Substantiation of health insurance coverage:  To participate in the HRA, employees and eligible dependents must be covered by individual health insurance that does not consist solely of excepted benefits (for example, stand-alone dental or vision coverage).  Employers must verify this coverage before making any reimbursements.
• Written notice requirement: Employers will be required to provide written notice to HRA-eligible employees disclosing the amount available to each participant for reimbursement through the HRA; the individual health insurance requirement and substantiation methods; the right to opt-out of HRA participation and future reimbursements; coordination of the HRA with the ACA Premium Tax Credit (PTC); that individual health insurance is not covered by ERISA rules; and other details concerning the HRA.

Opt-Out Provision

A new rule proposed for the Integrated HRA is the right to opt-out of HRA participation and waive future reimbursements from the plan. This is for employees that purchase individual health insurance on the ACA Health Insurance Marketplace (marketplace or exchange).

When an individual goes to the marketplace to purchase health insurance, he or she is required to report the availability of an HRA and the amount. That amount is offset against any PTC available on the exchange. Usually, the net result is the elimination of the PTC.

Today, there is no opt-out provision for HRAs. When an HRA is provided, the employee must remain a participant and report it on the exchange.

If the new Integrated HRA is adopted according to proposed rule, an opt-out provision can be offered. When an employee opts out of the HRA, a PTC may be available if the Integrated HRA and IHC are determined to be unaffordable (based on rules yet to be released).

Excepted Benefit HRAs (proposed)

An Excepted Benefit HRA would allow up to $1,800 in employer funds to reimburse employees for excepted benefits such as stand-alone dental or vision insurance, COBRA insurance premium, and certain long-term care insurance.

Under the proposed rule, an employer must offer employees a group health plan in order to offer the Excepted Benefit HRA. An employee may refuse the group health insurance and remain for the HRA, but the group health plan must be offered even if all eligible employees waive the coverage.

This requirement eliminates the possibility that an employer may offer both an Excepted Benefit HRA and an Integrated HRA since the latter requires that the employer offer no group health plan to employees.

Status of Proposed Rule to Expand HRA Options

The Proposed Rule was open for comment through December 28, 2018. The earliest possible date for enactment of the final version is January 1, 2020.