New guidance was released on September 13, 2013 that applies to Health Reimbursement Arrangements (HRAs) and other employer healthcare arrangements. Much of the guidance impacts employers that want to provide reimbursements to employees to help pay for individual health insurance policy premiums. Many employers have given this idea some consideration instead of offering a traditional group health plan to reduce their costs.

Earlier this year the Department of Labor issued guidance about HRAs that was confirmed in the new guidance.

The guidance indicates the following:

1. HRAs could not apply annual or lifetime dollar limits on coverage for essential health benefits, unless the HRA was “integrated” with another group major medical plan that provided coverage for essential health benefits without limits. HRAs are considered integrated if only made available to those employees that are enrolled in the group major medical plan.
    
2. HRAs cannot be integrated with individual market coverage, and thus would be considered “stand-alone” HRAs which could not apply annual or lifetime dollar limits on essential health benefits.

The new guidance suggests that even other types of stand-alone reimbursement plans, including those defined in IRS Code section 106(c)(2), must satisfy the market reforms that apply to group health plans. 

As a result, stand-alone HRAs and other types of employer-funded plans (which typically have annual limits) that reimburse individual policy premiums would generally fail to comply with market reforms and other provisions of the Affordable Care Act (ACA) such as the prohibition of annual dollar limits on essential health benefits.

Employers that are looking to help their employees purchase coverage in the individual market need to be aware of this new information. This guidance exposes employers to a whole new set of liabilities if they don’t have a properly structured plan. 

Stand-alone HRAs and other types of group health plans that provide reimbursements for excepted benefits (i.e. dental or vision only) are exempt from these market reforms. 

Flexible Benefits Service Corporation (Flex), in combination with our private insurance exchange InsureXSolutions^®, is committed to helping producers, employers and consumers navigate the health insurance marketplace while finding affordable solutions.

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Note: The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.