By Pension and Benefits Editorial Staff
The Center for Consumer Information and Oversight (CCIIO) has issued guidance to applicable state authorities regarding the form and manner in which to submit a written recommendation to restrict excepted benefit health reimbursement arrangements (HRAs) from reimbursing short-term, limited-duration insurance (STLDI) premiums for certain employers in their state. The purpose of such a restriction is to address concerns regarding the potential for adverse selection in the small group market if small employers that provide fully or partially insured health coverage also sponsor excepted benefit HRAs that reimburse STLDI premiums.
Excepted benefit HRAs. In June 2019, the Departments of Health and Human Services (HHS), Labor, and the Treasury (the Departments) published a final rule (HRA rule) that, among other things, created a new limited excepted benefit, known as an excepted benefit HRA. Under the HRA rule, for plan years beginning on or after January 1, 2020, benefits provided under an HRA or other account-based group health plan (other than a health flexible spending arrangement) are excepted and, therefore, not subject to the employer group plan rules, including the ACA market reforms if the following requirements are met:
- Other group health plan coverage that is not limited to excepted benefits and that is not an HRA or other account-based group health plan must be made available by the same plan sponsor for the plan year to the participant;
- The amounts newly made available for each plan year under the HRA or other account-based group health plan do not exceed $1,800, adjusted annually in the manner set forth in the HRA rule;
- The HRA or other account-based group health plan does not reimburse premiums for individual health insurance coverage, group health plan coverage (other than COBRA continuation coverage or other continuation coverage), or Medicare Part A, B, C, or D, except that it may reimburse premiums for such coverage that consists solely of excepted benefits; and
- The HRA or other account-based group health plan is made available under the same terms to all similarly situated individuals, regardless of any health factor.
Criteria for restriction. The HRA rule provides that the Departments may restrict excepted benefit HRAs sponsored by certain small employers in a state from reimbursing STLDI premiums, if five criteria are satisfied as follows:
- the restriction applies only to excepted benefit HRAs offered by small employers, as defined in PHS Act Sec. 2791(e)(4);
- the restriction applies only in situations in which the other group health plan coverage offered by the small employer pursuant to the HRA rule is either fully insured or partially insured;
- the restriction applies only if the Secretary of HHS makes a finding, in consultation with the Secretaries of Labor and the Treasury, that the reimbursement of premiums for STLDI by excepted benefit HRAs sponsored by applicable small employers in a state has caused significant harm to the small group market in the state that is the principal place of business of the small employers;
- this finding may be made only after submission of a written recommendation by the applicable state authority of such state, in the form and manner specified by HHS; and
- the restriction (or discontinuance of the restriction) must be imposed by publication of a notice by the Secretary of HHS in the Federal Register and shall be effective prospectively only and with reasonable time for plan sponsors to comply.
Recommendation requirements. The applicable state authority must submit a written recommendation to HHS If a state wishes to restrict reimbursement of STLDI premiums by excepted benefit HRAs meeting the applicable criteria (or discontinue a previously approved restriction). The recommendation must be submitted by email to HHS at [email protected]
The written recommendation must include evidence that the reimbursement of STLDI premiums by excepted benefit HRAs established by insured or partially insured small employers in the state has caused significant harm to the state’s small group market, including on small group market premiums. The evidence may include the applicable state authority’s documented overall assessment of the small group market in the state. It may also include representations made by small group market issuers that an increase in the purchase of STLDI coverage by employees of small employers as a result of STLDI premiums being reimbursed by excepted benefit HRAs has caused issuers to increase premiums for small group market insurance, due to the issuers’ reasonable belief about adverse selection in the small group market.
The Departments will not restrict reimbursement of STLDI premiums if the state’s recommendation includes only evidence of potential but not actual harm.
Request to discontinue restriction. A state can elect to have a previously approved restriction on reimbursement of STLDI premiums by excepted benefit HRAs in its state discontinued. To do so, the applicable state authority must submit a request to discontinue the restriction, and an explanation for why the state seeks to discontinue the restriction. Additionally, the state may provide a recommendation regarding the date upon which the restriction should be discontinued. A discontinuance of a restriction will only apply prospectively and with reasonable time for plan sponsors and issuers to adjust.
Evaluation of harm. HHS will evaluate each recommendation on a case-by-case basis. Factors that HHS may consider in determining whether significant harm to the state’s small group market has occurred include:
- the impact on issuers’ participation in the small group market,
- the magnitude of premium increases in the small group market,
- enrollment declines in the small group market, and
- changes to the health of the small group market risk pool
to the extent each factor is related to individuals purchasing STLDI with premiums that have been reimbursed by excepted benefit HRAs sponsored by applicable small employers.
Finding of harm. If the Secretary of HHS, in consultation with the Secretaries of Labor and the Treasury, makes a finding that the reimbursement of premiums for STLDI by excepted benefit HRAs sponsored by applicable small employers has caused significant harm to the small group market in the state that is the principal place of business of the small employers, HHS will publish a notice in the Federal Register announcing that excepted benefit HRAs offered by small employers that offer other group health plan coverage that is either fully insured or partially insured may not reimburse premiums for STLDI in that state. A restriction will only apply prospectively.
If the Secretary of HHS, in consultation with the Secretaries of Labor and the Treasury, declines to make the requested finding, HHS will notify the state of its decision in writing. Within 30 calendar days of receipt of such determination, a state may request HHS, in consultation with the Departments of Labor and the Treasury, to undertake a secondary review of the initial determination. The request must be submitted by email to HHS at [email protected], and additional evidence can be submitted with the request for review. If the secondary review upholds the initial determination, HHS will notify the state of its decision in writing. That notification will represent a final agency action on that single request. States will be able to submit new requests in the future.
HHS anticipates fewer than 10 states will submit these recommendations annually.
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