HRAs are Impacted by the Affordable Care Act

On January 24, 2013, the Department of Labor released a document containing guidance about the implementation of the Affordable Care Act.  Formatted as a series of frequently asked questions, the document included items relating to Health Reimbursement Arrangements (HRAs) and how they will be viewed through the Affordable Care Act (ACA) lens. 

The part of the ACA that directly affects HRAs is the Public Health Service Act (PHS Act) section 2711. It prohibits plans and issuers from imposing lifetime or annual limits on the dollar value of essential health benefits.  In our ACA blog series, we will dig deeper into the PHS Act, but for this post we will simply discuss its impact on HRAs.

First of all, “integrated” HRAs will not be impacted by the PHS Act.  An integrated HRA is a plan that is linked directly to the employer’s group health plan.  For example, if the group health plan has a $2,000 deductible and the employer adds an HRA that reimburses part of the deductible as it is incurred, the HRA is integrated. Because an integrated HRA is linked to the group health plan, which meets the requirement of not having a lifetime or annual limit, it complies with the Act.

Here’s the big news that is causing a shake-up for employers as it relates to HRAs:  “stand-alone” HRAs will not satisfy the requirements of the Public Health Service Act (PHS Act) section 2711.  

A stand-alone HRA is an HRA that is not directly tied to a group health plan. Many employers have begun implementing or considering funding an HRA for their employees that allows them to purchase individual insurance policies and be reimbursed for the premium through the HRA. By their nature, stand-alone HRAs have a specified annual cap. This cap fails the “no annual limit” requirement, so they will not be in compliance when the act is fully implemented in 2014.

Stay tuned for more information on the HRA/ACA connection, as well as for other critical information about the ACA and its impact on employers!