By Lauren Bikoff, MLS
New HHS proposal allowing integration of health reimbursement arrangements with individual health insurance coverage may lack practicality.
In October 2018, the Departments of Treasury, Health and Human Services, and Labor released proposed rules that would allow employers to integrate health reimbursement arrangements (HRAs) with individual health insurance coverage when certain conditions are met. The proposed rules also set forth conditions under which certain HRAs would be recognized as limited excepted benefits. However, most employers are likely to find excepted benefit HRAs to lack practical uses, according to recent comments from the HUB International employee benefits compliance team.
Background. Excepted benefit HRAs would cover limited excepted benefits, which are generally not subject to Patient Protection and Affordable Care Act (ACA) requirements, such as vision, dental, and long-term care benefits, among others. Under the proposed rules, employers must offer "regular" coverage to employees in order to also offer an excepted benefit HRA. In addition, the amount of reimbursement is limited to $1,800 per year, cannot reimburse individuals for group health plan premiums or Medicare parts B or D, and must be available on the "same terms" to similarly situated employees.
Limited relief. HUB noted that while this proposed excepted benefit HRA is a potential additional benefit option, "it overlaps significantly with existing excepted benefits." Currently, an employer may offer an HRA that covers dental, vision, and long-term care without the $1,800 cap, without the requirement to offer a separate health plan, and without the "same terms" requirement. "Therefore, for those types of coverage, this excepted benefit HRA is actually more restrictive."
Using the excepted benefit HRA to reimburse COBRA premiums "does not offer plan sponsors meaningful utility," according to HUB. "There are numerous (and significant) perils to subsidizing COBRA. Plus, the combination of the ‘same-terms’ requirement and the existing tax code nondiscrimination rules might require the excepted benefit HRA to be offered more broadly than the employer would like. Finally, $1,800 isn’t much of a subsidy for COBRA premiums."
HUB cautions employers not to rush to set these types of accounts up, especially since the final regulations may specify much different requirements. "Employers who might be interested in establishing an excepted benefit HRA should wait until additional clarifications are provided," HUB concluded.
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