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Clarification of Affordable Care Act Topics, including HRAs

Long-awaited information was received in "FAQs About Affordable Care Act Implementation (Part XI)" issued jointly from Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury on January 24, 2013, concerning a number of topics and importantly, Health Reimbursement Arrangements (HRAs) that incorporate lifetime or annual limits within their plan design. This Alert will briefly note the other topics covered in the FAQ, but focus on the implications of the FAQ on HRAs. The FAQ XI is available here.

A Variety of Topics Covered
The FAQs first delay the required Notice of Coverage Options available through the Exchanges from March 1, 2013, to a later date. The FAQs indicate that the Notices likely will need to be distributed in the late summer or fall of 2013, and there will be future guidance on complying with the Notice requirement that is expected to provide flexibility and adequate time to comply.

  • The FAQs also clarify that, while a wellness or health promotion program cannot require the disclosure of information related to firearms, a health care provider is not prohibited or limited in their communications with patients about firearms and gun safety.
  • The FAQs indicate that the Departments will not enforce certain health coverage mandates under ERISA, the PHSA and the Internal Revenue Code against group health plans that provide an EGWP (group Medicare Part D prescription drug coverage offered through an employer plan). Instead, the FAQs clarify that CMS requirements will apply.
  • The FAQs clarify what constitutes fixed indemnity coverage that qualifies as an excepted benefit.
  • The FAQs clarify the circumstances under which plan assets can be used to pay PCORI fees.

Health Reimbursement Arrangements: Excepted, stand-alone or integrated
Typically, HRAs are established to pay medical expenses and have a variety of plan designs, many of which include annual limits. However, HRAs qualify as group health plans and therefore must comply with certain Patient Protection and Affordable Care Act (PPACA) rules and regulations including the prohibition of annual or lifetime limits unless:

  • They are integrated with a qualified underlying health plan,
  • They only cover excepted benefits such as vision and dental expenses, or
  • Are considered a "retiree only" plan.

Many employers have questioned how to determine if an HRA is integrated with employer-sponsored primary health plans or would be considered a "stand-alone" plan.

Several Q&As in this latest set of Frequently Asked Questions assist employers in answering the "integrated vs. stand-alone" conundrum, so they may formulate a go-forward approach for their HRAs.

What is an Integrated HRA?
FAQs Part XI gives a clear answer. For an HRA to be considered integrated with a group health plan, the HRA must benefit only employees who are covered by primary group health plan coverage that meets the requirements of PPACA and is provided by the employer. For instance, it appears that an integrated HRA could not benefit an employee who was eligible for the health plan but not enrolled.

Also, the FAQ clarifies that an employer-sponsored HRA cannot be integrated with individual market coverages or with employer plans that provide coverage through individual policies.

Start Preparing Now
Do you maintain an HRA? If you offer HRA coverage only to employees participating in the health plan, you can maintain your current HRA as is. If not, first of all, review the purpose of your HRA. What is the intent, who should it benefit and for how much? Perhaps a change in your eligibility or plan design would assure your HRA fits into the scenarios outlined in the FAQ. Options include:

  • Ensuring that your HRA is integrated by only covering those who are enrolled in the health plan.
  • Allocating employer dollars to employees through a health Flexible Spending Account (FSA).
  • Amending your HRA to provide only vision and dental coverage in order to preserve an annual dollar limit available to participants.
  • Reviewing your retiree HRA to ensure that no rehired retirees (active employees) participate.

If your present stand-alone HRA will have unused amounts credited prior to January 1, 2014, those dollars may be used after December 31, 2013, to reimburse medical expenses through your stand-alone HRA, with certain restrictions. You are not permitted, however, to increase the amount you are crediting to an HRA for 2013 above what was in effect on January 1, 2013.

WageWorks continually works with industry leaders to submit comments on regulations that impact the plans that we administer. We are currently working to seek clarification on a number of open issues related to Health Reimbursement Arrangements, including:

  • The impact to the HRA of an employee covered under a spouse's group health plan,
  • Whether an excepted benefits category for a nominal stand alone HRA can be created,
  • Whether a premium only HRA arrangement may be allowable, and
  • Whether an HRA that qualifies as an FSA under IRC 106 (i.e., limited under 5x rule) may still be allowed under current interim regulations.

We are committed to helping you through these changes and will continue to provide updates to you as new information becomes available.

The information contained in this memo is not intended to be legal, accounting or other professional advice. We assume no liability whatsoever with its use, and these comments are not directed to specific situations.