The Department of the Treasury, the Department of Labor, and the Department of Health and Human Services (the Departments) have jointly released the final expanded Health Reimbursement Arrangement (HRA) regulations. The new rules will allow HRAs to be used to pay for individual health insurance policies and creates a new type of stand-alone limited benefit HRA.
By way of background: Until now, “current” guidance prohibits employers from paying for an employee’s individual health insurance policy. HRAs that reimburse more than excepted benefits must also be integrated with a group health plan, meaning that HRA coverage can be offered only to employees and dependents who are also covered by the group health plan. The Departments first issued proposed HRA regulations designed to expand the use of HRAs in October 2018; those regulations have now been finalized. The new rules are effective for plan years beginning 01/01/2020.
New HRA Rules Summary -- The new rules create two new types of HRAs:
(1) Individual Coverage HRA
(i) An HRA funded by employers and used by employees to pay for individual health coverage.
(ii) This HRA can also be designed to reimburse other eligible §213(d) expenses.
(iii) This type of HRA cannot be offered to a class of employees who are eligible for group health plan coverage. Allowable employee classes are defined in the regulations.
(2) Excepted Benefit HRA
(i) A limited stand-alone HRA with an $1,800 annual maximum benefit that can be used to reimburse §213(d) medical expenses for eligible employees and dependents.
(ii) Unlike an individual coverage HRA, an excepted benefit HRA can be offered only to employees who are also eligible for an employer sponsored group health plan.
The new rules make no changes to the employer’s ability to integrate an HRA with group health plan coverage. Employers are also still allowed to offer a stand-alone HRA for the reimbursement of excepted benefits, and to offer a full stand-alone HRA to retirees. These rules provide additional options that employers may want to explore, although many may not be ready to adopt such changes by early 2020. The attractiveness of such options will depend on the employer’s staffing and benefit-offering goals and on the individual coverage options and vendor solutions available (which may vary from market to market and may change over time).
A copy of the final regulations can be found here – https://www.federalregister.gov/documents/2019/06/20/2019-12571/health-reimbursementarrangements-and-other-account-based-group-health-plans.
The Departments also released a FAQ, found here – https://www.cms.gov/CCIIO/Programsand-Initiatives/Health-Insurance-Market-Reforms/Downloads/HRA-FAQs.pdf.