Looming Health Reimbursement Arrangement Regulations

How small to mid-sized employers who find traditional group health insurance plans to be too expensive could benefit from the expansion of HRAs.

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Published August 20, 2018

In October of 2017, President Donald Trump issued an executive order which was entitled “Promoting Healthcare Choice and Competition Across the United States.” The executive order instructed regulatory agencies to focus on three initiatives:

  1. Expand the availability of Association Health Plans (AHPs). Earlier this summer, the Department of Labor (DOL) issued final rules making AHPs available to employers who are in the same industry and/or geographic location. Click here for more details.
  2. Expand the availability of Short-Term Medical Plans (STM plans). Earlier this summer, the DOL and other regulatory agencies jointly issued final rules allowing STM Plans to have an initial coverage period of 364 days and continuous coverage of up to 36 months when taking renewals into account. Click here for more details.
  3. Expand the availability of Health Reimbursement Arrangements (HRAs). To date, no regulatory guidance has been issued to expand the availability of HRAs.

Under the Obama administration, the Internal Revenue Service (IRS) issued HRA guidance in Notice 2013-54. In this notice, the IRS took the position that many types of HRAs had to be integrated with a group major medical plan. Failure to be integrated with a group major medical plan would make the HRA subject to Affordable Care Act (ACA) market reforms, including the requirement to cover essential health benefits without any annual or lifetime dollar limits.

Many suspect the Trump administration is looking at legal ways to reverse or change the guidance that was included in Notice 2013-54. There is potential that new guidance could allow for integration with an individual major medical plan or the integration requirement may be eliminated altogether, but we have yet to see any proposed rules to know for certain.

If the integration requirement were to be more flexible or eliminated, that would free up the ability for employers to offer more types of stand-alone HRAs, including those that reimburse individual health insurance premiums. This may benefit small and medium size employers who find it too costly to offer a more traditional group major medical plan.

Unless and/or until new HRA guidance is issued, it’s unclear how this might benefit larger organizations who must comply with the Employer Mandate. That gets a little more tricky since applicable large employers have to offer coverage which is affordable and provides minimum to avoid the risk of penalties.