The Proposed Expansion of Health Reimbursement Arrangements: Is this a Game Changer for Employers?

In perhaps the most significant guidance resulting from President Trump’s 2017 Executive Order Promoting Healthcare Choice and Competition Across the United States, on October 22, 2018, the Departments of Treasury, Labor, and Health and Human Services (the Departments) jointly released proposed regulations on health reimbursement arrangements (HRAs) and other account-based plans that would allow two new types of HRAs. If finalized, the proposed regulations will impact employers of all sizes.

The proposed regulations may especially be useful for small and medium-sized companies that want to be able to define the costs that they are willing to pay towards employee health insurance coverage by using HRAs with a fixed annual employer contribution and that have a small enough workforce to satisfy some of the consistency requirements of the proposed regulations.

The proposed regulations provide for two new types of HRAs:

  • HRAs Integrated with Individual Health Insurance Coverage (Individual Coverage HRAs)
  • Standalone Excepted-Benefit HRAs Up to $1,800 (as indexed for inflation)

Under current guidance, HRAs must be integrated with other qualifying group health plan coverage that satisfies the Affordable Care Act’s (ACA’s) market reform mandates. Currently, HRAs are not allowed to be integrated with individual health insurance coverages and offering a non-integrated HRA would violate the ACA (triggering a $100/day per employee excise tax).

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