Health Care Reform: DOL, IRS and HHS Issue Guidance on the Affordable Care Act Impact on HRAs, Health Care FSAs and Other Arrangements
The Internal Revenue Service, the Department of Labor and the Department of Health and Human Services (Departments) have released identical guidance (IRS Notice 2013-54, DOL Technical Release 2013-03) addressing the prohibition on annual limits on essential health benefits and the requirement that non-grandfathered plans provide first dollar coverage with respect to certain preventive services. In a separate memorandum, HHS has indicated its concurrence with the IRS and DOL guidance. The new guidance is generally effective for plan years beginning on or after January 1, 2014, and can be relied upon for prior periods.
The guidance discusses (1) Health Reimbursement Arrangements (HRAs) including HRAs integrated with a group health plan; (2) group health plans under which an employer reimburses an employee for some or all of the premiums for an individual policy (employer payment plans); and (3) certain flexible spending arrangements (FSAs).
In previous guidance the Departments had already taken the position that an HRA “integrated” with a primary group medical plan would be deemed to satisfy the annual dollar limit prohibition. They had further stated that an HRA is “not integrated” with a primary group health plan unless the HRA was only available to employees who are covered by the primary plan that meets annual dollar limitations.
The new guidance confirms prior guidance and provides clarification on, among other issues, the following:
- An HRA used to purchase coverage on the individual market is not considered integrated with that individual market coverage for purposes of the annual dollar limit prohibition and/or the preventive services requirements.
- An HRA that is integrated with a group health plan will comply with the preventive services requirement if the group health plan with which the HRA is integrated complies with the preventive services requirement.
- An HRA that is a retiree-only HRA is considered minimum essential coverage for purposes of Code Sections 5000A and 36B. The standalone retiree-HRA would constitute an eligible employer-sponsored plan and therefore the coverage would constitute minimum essential coverage, for a month in which funds are retained in the HRA.
- The guidance also indicates that the applicable regulations will be amended to allow EAPs to be considered excepted benefits that are not subject to many of the health care reform mandates, if the EAP does not provide significant benefits in the nature of medical care or treatment.