Final HRA rules permit integration with individual health insurance

June 18, 2019

By Sally P. Schreiber at Journal of Accountancy on June 17, 2019

The Departments of the Treasury, Labor, and Health and Human Services (the Departments) jointly issued final regulations governing health reimbursement arrangements (HRAs) (T.D. 9867). The final regulations allow integration of HRAs with individual health insurance coverage (or Medicare), if certain conditions are satisfied. The rules also allow certain HRAs to be recognized as excepted benefits.

HRAs are generally account-based group health plans funded solely by employer contributions that reimburse employees for health care costs.

The Departments noted that the regulations were being issued to increase the usability of HRAs, to expand employers’ ability to offer HRAs to their employees, and to allow HRAs to be used in conjunction with nongroup health insurance coverage (generally coverage on the individual market).

Integration with individual health coverage

The rules remove the prohibition on integrating an HRA with individual health insurance coverage, if certain conditions are met, and contain requirements that an HRA must meet to be integrated with individual health insurance coverage. The final rules denote these plans as “individual coverage HRAs.”

The Departments are concerned that allowing HRAs to be used may result in employers’ encouraging higher-risk employees who have higher expected medical claims to obtain insurance on the health insurance exchange for individual health coverage, which could destabilize the individual health insurance marketplace by steering more high-risk people to it.

Therefore, the final rules prevent a plan sponsor from steering any participants or dependents with adverse health factors away from the plan sponsor’s traditional group health plan and into the individual market, either intentionally or unintentionally, and directly or indirectly. That is, the rules for integrating HRAs prohibit a plan sponsor from offering the same class of employees both a traditional group health plan and an HRA integrated with individual health insurance coverage. In addition, to the extent a plan sponsor offers an HRA that is integrated with individual health insurance coverage to a class of employees, the integration rules require that the HRA be offered on the same terms to all employees within the class, subject to certain exceptions.

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