IRS Notice 2013-54 and DOL Technical Release 2013-03 provided much-awaited answers to questions about what types of HRAs comply with these ACA rules. The guidance also addressed Employee Assistance Programs (EAPs). The Notice and Technical Release mirror each other. The guidance applies to plan years starting on or after January 1, 2014. Additional regulatory guidance will be forthcoming.
Recall that under the ACA, group health plans may no longer have annual limits and must provide first-dollar, 100 percent coverage for preventive services for plan years starting on or after January 1, 2014. Stand-alone HRAs that provide retiree-only, dental-only or vision-only coverage are exempt from these requirements.
While the 12-question guidance did not directly mention stand-alone HRAs (except in the retiree context), the guidance did not provide an exemption for them either. Here are the highlights of the guidance:
- HRAs that are used to purchase individual coverage are not integrated and therefore violate the ACA rules on annual limits and preventive services.
- There are two methods for showing that an HRA is integrated with a group health plan and are therefore exempt from the ACA rules on annual limits and preventive services:
- Minimum value not required. Five conditions must be satisfied: 1. the employer offers a group health plan that is not a HIPAA-excepted benefit; 2. actual enrollment is required in the employer’s or the spouse’s employer’s group health plan; 3. the HRA is available only if enrolled in a group health plan; 4. the HRA can only reimburse co-payments, co-insurance, deductibles, premiums under the non-HRA group coverage and Code §213(d) medical care that is not essential health benefits; and 5. an employee (or former employee) may permanently opt out of and waive future HRA reimbursements at least annually and upon employment termination.
- Minimum value required. Four conditions must be satisfied: 1. the employer offers a group health plan that is not a HIPAA-excepted benefit and provides minimum value (MV); 2. actual enrollment is required in the employer’s or the spouse’s employer’s MV group health plan; 3. the HRA is available only if enrolled in an MV group health plan; and 4. an employee (or former employee) may permanently opt out of and waive future HRA reimbursements at least annually and upon employment termination.
- Examples are provided for the two integration methods.
- These same rules apply to the small number of Health FSAs that do not qualify as a HIPAA-excepted benefit.
- The Departments indicated that they were aware that many in the industry have focused on §106(c)(2) of the Code to argue that HRAs are not subject to the annual limits rules. Whether this statement is true remains under consideration. However, these types of HRAs would still fail to comply with the ACA: “…the treatment of an HRA as a health FSA that is not excepted benefits would not exempt the HRA from compliance with the other market reforms, including the preventive services requirements, which the HRA would fail to meet because the HRA would not be integrated with a group health plan. This analysis applies even if an HRA reimburses only premiums.”
- Employer payment plans and reimbursement arrangements, under Revenue Ruling 61-146, are considered to be group health plans.
- Through 2014, EAPs will be considered to be HIPAA-excepted benefits only if the EAP does not provide significant benefits in the nature of medical care or treatment, based on the employer’s reasonable, good faith interpretation.
