Making Sense of the New Guidance Around HRAs
On Sept. 13, 2013, the IRS issued details on permissible health reimbursement arrangements(HRAs), providing some clarification on minimum essential, minimum value and affordable coverage, and addressing payment of individual premiums through an employer-provided plan.
Most people had expected that standalone HRAs would have difficulty meeting PPACA's prohibition on dollar limits, and the Notice confirms this. Beginning with the 2014 plan year, an HRA will not be permitted unless:
- It is integrated with a group medical plan that does not have dollar limits and that provides first-dollar benefits for preventive care,* or
- The HRA only provides "excepted benefits" such as standalone dental or vision, or
- The HRA only covers retirees.
In order for an HRA to be integrated:
- The HRA must only be available to employees who are actually enrolled in group medical coverage (either through the employee's or a family member's employer); and
- The employee receiving the HRA must actually be enrolled in a group medical plan (either through the employee's or a family member's employer); and
- The HRA must be written to give the employee the opportunity at least annually to permanently decline participation in the HRA, and when employment terminates the employee must be allowed to permanently decline participation in the HRA or the balance must automatically be forfeited at termination.
United Benefit Advisors developed a full summary on this guidance, which includes additional information on the following:
- Further details on integrated vs. stand-alone HRAs
- How HRAs intersect with minimum essential coverage
- HRA impact on minimum value and affordability
- Definition of premium reimbursement arrangements (now called "employer payment plans")
- Next steps employers should consider when it comes to HRAs
* Grandfathered plans are not required to provide first dollar coverage for preventive care.