Benefits & Compensation News

Feds put the kibosh on ‘stand-alone’ HRA

The Departments of Health and Human Services, Labor and Treasury just significantly limited how employers can use health reimbursement arrangements (HRAs).

If your company was planning on funding an HRA next year that employees could use to purchase health care coverage on an state- or government-run insurance exchange, it’s time to come up with a plan B.

The feds just issued an FAQ that says providing employees with a pre-determined dollar amount in an HRA that they can apply toward the purchase of health coverage on the individual health insurance market will violate the health care reform law’s ban on lifetime and annual dollar limits on coverage.

Integrated HRA? That’s OK

The FAQ classifies these kinds of arrangements as “stand-alone” HRAs — in other words, they are not “integrated” with group health plan coverage, but provide a stand-alone benefit subject to the reform law.

Beginning in 2014, when the ban on lifetime and annual dollar limits kicks in, stand-alone HRAs with a fixed-dollar contribution will no longer be permitted.

But employers can continue to use “integrated” HRAs that are paired with an employer’s group health plan — like many employers currently have established under their high-deductible health plans (HDHPs) for the reimbursement of copays and deductibles.

However, the departments made it clear that an employer-sponsored HRA will only be considered integrated with a health plan if the employee who has the HRA is enrolled in that plan.

What to do with unused dollars

If you currently have a stand-alone HRA under the government’s new definition, unused funds deposited in the HRA prior to Jan. 1, 2014 can still be used after Dec. 31, 2013 to reimburse medical expenses, according to the FAQ.

But if an employer’s HRA did not set a limit on the amounts to be credited during 2013, then the amounts credited cannot exceed the total amount credited in 2012.

The feds do intend to issue further guidance on the issue. We’ll keep you posted.

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