DOL Limits Health Reimbursement Arrangements

September 25, 2013

pic-health-insuranceOn September 13, 2013, the Department of Labor released a new guidance document providing details on how the Patient Protection and Affordable Care Act (PPACA) will impact Health Reimbursement Arrangements (HRAs), Flexible Spending Accounts (FSAs) and various other health savings accounts.

The guidance, Technical Release No. 2013-03, is formally titled “Application of Market Reform and other Provisions of the Affordable Care Act to HRAs, Health FSAs, and Certain other Employer Healthcare Arrangements.” To read this guidance, click here.

An HRA is an arrangement that is funded solely by an employer and that reimburses an employee for medical care expenses or non-employer sponsored hospital and medical insurance. Under the new rules, for plan years beginning in 2014, employers cannot offer a stand-alone HRA to employees. Employers can only offer HRAs that are integrated with a group health plan.

An HRA is integrated with another group health plan if:

(1) the employer offers a group health plan (other than the HRA);

(2) the employee receiving the HRA is actually enrolled in a group health plan (other than the HRA);

(3) the HRA is limited to reimbursement of one or more of the following—co-payments, co-insurance, deductibles, and premiums under the non-HRA group coverage, as well as medical care that does not constitute essential health benefits under the Patient Protection and Affordable Care Act (PPACA); and

(4) under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of and waive future reimbursements from the HRA.