Regulators have issued proposed rules allowing for the integration of health reimbursement arrangements (HRAs) with individual health insurance coverage, if certain conditions are met.
John Barkett, senior director of policy affairs at Willis Towers Watson, in Washington, D.C., explains that HRAs have to be connected to a group health plan, with some exceptions for retirees. This proposed rule would take away that requirement.
The proposed rules also set forth conditions under which certain HRAs would be recognized as limited excepted benefits. Also, the Department of the Treasury and the IRS propose rules regarding premium tax credit (PTC) eligibility for individuals offered coverage under an HRA integrated with individual health insurance coverage. The Department of Labor (DOL) proposes a clarification to provide plan sponsors with assurance that the individual health insurance coverage the premiums of which are reimbursed by an HRA or a qualified small employer health reimbursement arrangement (QSEHRA) does not become part of an Employee Retirement Income Security Act (ERISA) plan, provided certain conditions are met. Finally, the Department of Health and Human Services (HHS) proposes rules that would provide a special enrollment period in the individual market for individuals who gain access to an HRA integrated with individual health insurance coverage or who are provided a QSEHRA.
The agencies say the goal of these proposed rules is to expand the flexibility and use of HRAs to provide more Americans with additional options to obtain quality, affordable health care.
Barkett says this is the first legal framework for employers that want to contribute to employees’ purchase of health insurance but don’t want to pick the plan. However, this model could lower costs for employers if they look at the individual marketplace employees have access to and see plans that may be attractive to employees that cost less than the group plans they have today.
“They wouldn’t have to give as much money, but would still keep employees whole,” he says. He offers the analogy of an employer that offers free lunch to employees in a company cafeteria, but a new food court opens up across the street. The employer now has the option to keep running the cafeteria or to give employees subsidies to shop in the food court, allowing them more options.
Barkett says the proposal would also include an arrangement in which the employer allows employees to purchase health insurance, provide a receipt to the employer and get reimbursed.
According to Barkett, there are three things important for employers to consider. First, this is a really new alternative to traditional employer sponsored coverage. Employers should decide if the individual market is a better place for employees to find coverage and whether it is a better way to attract employees.
Secondly, the plans employees would be shopping for are Affordable Care Act (ACA)-compliant plans—they offer essential health benefits, consumer protections of guaranteed issue, and there are no exclusions of pre-exiting condition. Under the proposal, employees cannot buy a short-term plan but the regulators have asked for comments about whether this should be allowed.
Third, Barkett says, moving to this model gives employees a chance to stay in a health plan if they were to leave their job. “The relationship is now between the employee and the health plan, which may be an attractive feature for employers that have a lot of turnover,” he says.
One thing employers should note, according to Barkett, is that the proposed rules would move employee coverage from the employer to the state department of insurance and policy makers in the state who are overseeing the insurance marketplace. Plans may be more or less expensive depending on where employees live; premiums and the number of insurance options may vary by where employees live. “Employers with employees in different states would have to examine plan options in different areas to see if benefits are attractive to employees,” he says.
There is a difference between this proposed rule and QSEHRAs created in 2016. Barkett explains that any size employer can offer the proposed untethered HRAs, whereas QSEHRAs are limited to employer with less than 50 full-time employees. In addition, QSEHRAs limit the amount of money employers can put into them, but under the new HRA proposal, there is no limit to how much an employer can put it.Text of the proposed rule may be downloaded from here. A fact sheet on the proposed regulations is here.