Benefits, Benefits Compliance, Exchanges / Marketplaces / Subsidies, Health Care Reform, Health Insurance Marketplaces, HRAs & HSAs, Small Employers

Final Rule on Health Reimbursement Arrangements (HRA)—Permits Individual Coverage HRA

On June 13, 2019, the final Health Reimbursement Arrangement rules were pre-released by the Departments of Labor, Health and Human Services, and the Treasury (collectively, the Departments) permitting employers to offer a new “Individual Coverage HRA” as an alternative to traditional group health plan coverage, subject to certain conditions. Among other medical care expenses, Individual Coverage HRAs can be used to reimburse premiums for individual health insurance chosen by the employee, promoting employee and employer flexibility, while also maintaining the same tax-favored status for employer contributions towards a traditional group health plan.

Under the rule, starting in January 2020, employers will be able to use what are referred to as individual coverage HRAs to provide their workers with tax-preferred funds to pay for the cost of health insurance coverage that workers purchase in the individual market, subject to certain conditions. The new rules also increase flexibility in employer-sponsored insurance by creating another, limited kind of HRA that can be offered in addition to a traditional group health plan. These “Excepted Benefit HRAs” permit employers to finance additional medical care (for example to help cover the cost of copays, deductibles, or other expenses not covered by the primary plan) even if the employee declines enrollment in the traditional group health plan – creating an individual coverage HRA. The new rules include a notice requirement to ensure employees understand the benefit.

Action Required

Action may be required for some plan sponsors seeking alternative plan designs in 2020. No action otherwise required. See the FAQs for more specific details on these changes.

The Leavitt Group compliance team will be sure to issue an Employee Benefits Compliance Alert providing full details. Be sure to subscribe!

Additional Resources

News Release, available at https://www.dol.gov/newsroom/releases/ebsa/ebsa20190613

Frequently Asked Questions, available at https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/health-reimbursement-arrangements.pdf

Model Attestation, available in Word at https://www.dol.gov/sites/default/files/ebsa/laws-and-regulations/rules-and-regulations/completed-rulemaking/1210-AB87/individual-coverage-model-attestation.docx

Leave a Reply

Your email address will not be published. Required fields are marked *