Some Premium Reimbursement Arrangements Violate ACA

The Department of Labor has issued frequently asked questions (FAQs) about the compliance of health care premium reimbursement arrangements with the Patient Protection and Affordable Care Act (ACA).

The FAQs supplement prior guidance by the DOL and the Department of Treasury that employer health care arrangements, such as health reimbursement arrangements (HRAs) and employer payment plans, are group health plans that are subject to the group market reform provisions of the ACA. The Departments’ prior guidance clarified that these employer health care arrangements will not violate market reform provisions when integrated with a group health plan that complies with such provisions. However, an employer health care arrangement cannot be integrated with individual market policies to satisfy the market reforms.

The new guidance clarifies that if an employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the payment arrangement is part of a plan maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and can trigger penalties. Under the DOL’s prior published guidance, the cash arrangement fails to comply with the market reforms because the cash payment cannot be integrated with an individual market policy.

In addition, the DOL clarifies that a vendor product for which employers cancel their group policies, set up a Code section 105 reimbursement plan that works with health insurance brokers or agents to help employees select individual insurance policies, and allow eligible employees to access the premium tax credits for federal marketplace coverage also does not comply with the ACA.

Finally, the FAQs make it clear that if an employer offers employees with high claims risk a choice between enrollment in its standard group health plan or cash, the DOL considers this discriminatory.

The FAQs are here.