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HRA relief from ACA employer mandates: Proposed
Health Reimbursement Arrangements (HRAs) are employer-managed accounts that reimburse employees for eligible out-of-pocket medical expenses. Once a favorite employer-sponsored health benefit, the Affordable Care Act of 2010 (ACA) with its coverage requirements and mandates prevented many from using the arrangements as an affordable, stand-alone option. Now the Trump administration brings HRA relief from ACA employer mandates with new proposed guidance from the Treasury, DOL, and HHS.
The biggest burden the ACA puts on employers is that an HRA provided to employees must also provide an employer-sponsored group health plan with the ACA’s yearly and lifetime limits and essential health benefits.
Background: Small-Employer Relief (QSE-HRA)
One of the last measures passed during the Obama administration, the 20th Century Cures Act (under Title XVIII), designed an HRA for small employers not subject to the ALE coverage mandate. The Qualified Small Employer HRA (QSE-HRA) is a non-integrated (stand-alone) HRA for groups with fewer than 50 employees.
It provides much-needed HRA relief from ACA employer mandates by making a way for small employers to provide health care expense assistance to employees without having to meet the ACA’s high group health plan (GHP) demands.
Under it, employers do not offer a GHP to active employees. Instead, a QSE-HRA reimburses employees for individual health coverage (IHC) purchased on the open market or the ACA marketplace.
Small employers flocked to the QSE-HRA, while larger employers continued to seek similar HRA relief from the ACA’s employer coverage mandate.
All-Employer Relief (EO #13813)
In late October 2018, the Internal Revenue Service (IRS), the Employee Benefits Security Administration, and the Health and Human Services Department, issued a Proposed Rule for Health Reimbursement Arrangements and Other Account-Based Group Health Plans.
The Proposed Rule comes in response to the President’s Executive Order (EO) No. 13813, Section 4, Expanded Availability and Permitted Use of Health Reimbursement Arrangements, which instructs the departments to, “consider proposing regulations or revising guidance . . . to allow HRAs to be used in conjunction with nongroup coverage.”
The Proposed Rule suggests HRA relief from ACA employer mandates by introducing two HRAs for employers of any size — the Integrated Coverage HRA and the Excepted Benefit HRA.
Where we are now
The Proposed Rule was open for comment through the end of 2018 with an expectation of guidance for the plans being released by the IRS for plan years beginning January 1, 2020 and later. None of the provisions outlined here for ICHRA or EBHRA plans to bring HRA relief from ACA employer mandates is in effect until offical IRS guidance is released.
Core Documents will keep track of this issue for you. Further updates will be linked on this page.
Read more related to HRA relief from ACA employer mandates:
Small Employer Benefits Affordable with HRA HSA HDHP
What is the QSE-HRA no group health plan rule?
HRAs offset premiums and deductibles in group health plans
Section 105 HRA Plan for 1 Employee or Spouse (video)