HHS Issues New Guidance on Annual Limit Waivers and HRAs

On June 17, 2011, HHS issued guidance allowing plans to extend their current waivers through January 1, 2014, when annual limits on essential health benefits no longer are permitted, and providing that the deadline for receipt of waiver requests or extensions is September 22, 2011. 

On August 19, 2011, HHS issued additional guidance that provides an exemption from the annual limit waiver process for certain health reimbursement arrangements (HRAs) that are subject to the PPACA annual limit restrictions.  We answer recently received waiver questions below.

Which HRAs are now exempt from the HHS annual limit waiver process?

The HHS guidance issued on August 19, 2011, exempts HRAs that are subject to the PPACA annual limit restrictions and that were in existence prior to September 23, 2010 from having to individually apply for an annual limit waiver (or waiver extension) for plan years beginning before January 1, 2014.  The guidance provides no indication of how HHS intends to handle HRAs that are subject to the PPACA annual limit prohibition that takes effect in 2014.

Are exempt HRAs subject to any annual limit waiver requirements?

The HHS guidance provides that exempt HRAs still must comply with HHS waiver program record retention and annual participant notice requirements.  HHS updated the waiver technical instructions on their website to include an update for HRAs, including “alternate Annual Notice language for HRAs that have not yet issued their Annual Notice” (see pp. 10-12 of the instructions at http://cciio.cms.gov/resources/files/annual%20_limit_waivers_technical_instructions_update_081911.pdf 

What does this new HHS guidance mean for HRAs that were not in existence prior to September 23, 2010?

It appears that HRAs that are subject to the PPACA annual limit restrictions but came into existence on or after September 23, 2010 are not covered by this new HRA exemption and also cannot apply for an annual limit waiver under the HHS program that expires on September 22, 2011.  This effectively means that a new HRA has to otherwise be exempt from the PPACA annual limit restrictions (e.g., because it is integrated with other health coverage that satisfies the annual limit restrictions or provides "retiree-only" coverage) to avoid having the PPACA annual limit restrictions (e.g., $750,000 minimum annual limit for plan years beginning on or after September 23, 2010 but before September 23, 2011; $1.25 minimum annual limit for plan years beginning on or after September 23, 2011 but before September 23, 2012) apply.

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You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html   

Contributors:

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.