New Rules for HRAs Under PPACA Raises Compliance Questions for Plan Sponsors. WageWorks Offers Answers and Guidance.
Many of our clients provide Health Reimbursement Arrangements (“HRAs”) to help their employees manage out-of-pocket health care expenses. HRAs are considered “group health plans” and, as a result, are subject to certain insurance market reforms imposed by the Patient Protection and Affordable Care Act (“PPACA”).1 For example, under PPACA, HRAs that permit coverage for dependents are now required to provide coverage for dependents through 26 years of age. In addition, many HRAs are also subject to the new claims and appeals rules, including the rule that participants have the right to an external review of a denied claim. There is, however, some uncertainty among industry experts as to whether PPACA’s prohibition against lifetime limits and restrictions on annual limits applies to HRAs.
WageWorks has reviewed each of the new rules under PPACA that are applicable to HRAs and has developed plans to help clients bring their HRA plans into compliance with these new rules. This Compliance Alert provides you with information regarding how WageWorks is implementing the new claims and appeals procedures and is addressing PPACA’s prohibition against lifetime limits and restrictions on annual limits.
Claims and Appeals Rules. PPACA’s new claims and appeals rules are an expansion of ERISA’s current claims and appeals rules. The most notable change is that HRAs must now provide participants with the right to an external review of a denied claim upon request. Prior to PPACA, some states required the right to an external review of a denied claim for HMOs, but PPACA now expands this right to all HRAs.2 In addition, PPACA’s new rules also require that HRA participants have the right to present evidence or testimony in connection with the appeal of a denied claim and the ability to view their entire claim file.
To comply with these requirements, WageWorks has reviewed and updated its claims and appeals procedures, revised its participant communications and notices and reprogrammed our systems. WageWorks has also engaged two independent review organizations, and intends to engage one or two additional review organizations, to perform external reviews of participant HRA claims appeals. Clients with affected HRA plans will need to execute an amendment to our Master Services Agreement that outlines the terms and conditions for the provision of additional external claims appeal review services.In addition, clients should review their plan documents and summary plan descriptions to ensure that these changes are addressed. Contact your Client Services Team representative if you’d like WageWorks to prepare draft plan amendment and SPD language.
Preventive care rules. PPACA’s preventive care rules require that plans cover certain preventive care services free of cost-share.3 If an HRA is offered under a single group health plan that includes a major medical plan that offers preventive care on a first-dollar basis before the deductible is met, the combined plan should satisfy the preventive care requirements. But if a high deductible HRA is a stand-alone HRA, the HRA may not be compliant with the new preventive care rules because reimbursements for preventive care services likely need to be provided from the HRA before the deductible is met. Contact your Client Services Team representative if you’d like to discuss the implications of this rule for your plan.
Lifetime and Annual Limit Rules. PPACA prohibits lifetime limits on essential benefits and allows only restricted annual limits on essential benefits until 2014. After 2014, no annual limits on essential benefits will be permitted. Many industry experts have questioned whether and how these new rules might apply to HRAs. Certain HRAs will not be subject to the new rules – including HRAs that are part of an integrated group health plan (that complies with the lifetime and annual limit restrictions), retiree only HRAs, limited purpose HRAs, and possibly HRAs that meet a special exception for health flexible spending accounts. The federal government has issued interim final regulations related to the lifetime and annual limit rules, and has requested comments regarding the application of these rules to stand-alone, general purpose HRAs. It is WageWorks’ position that all HRAs are exempt from the lifetime and annual limit rules, and WageWorks is working with other industry leaders to obtain favorable guidance from the regulators on this issue.
The Department of Health and Human Services (“HHS”) has, however, established a waiver program under which plans may apply on an annual basis for a waiver of the annual limit rules. Because of the lack of clarity on this issue, WageWorks applied for, and received4, a waiver of the restricted annual limits for 2011. This waiver exempts all WageWorks-administered HRAs that were either in effect as of January 1, 2011 or that contracted for administrative services for 2011. In addition, HHS recently issued a model notice for use by plans that have obtained a waiver to provide to participants regarding this issue. Unfortunately, this notice does not specifically address stand-alone HRAs that are intended to assist participants with out-of-pocket health care expenses. Therefore, WageWorks has provided draft notice language for its clients to review and distribute.
1 Please note that certain HRAs are exempt from many of PPACA’s rules, including HRAs that extend coverage only to retirees or those HRA’s that are established for the reimbursement of excepted benefits, such as dental or vision expenses only.
2 The right to external review does not apply to HRAs that are grandfathered or exempt. Under PPACA, a group health plan is “grandfathered” if the plan was in effect on March 23, 2010, has not been impermissibly amended since that date, and notifies participants of its grandfathered status.