Recent Guidance Issued on PPACA and its Impact on Health Reimbursement Arrangements, Flexible Spending Accounts and Employee Assistance Programs
The Department of Labor recently issued guidance addressing the impact of the Patient Protection and Affordable Care Act ("PPACA") on health reimbursement arrangements ("HRAs"), health flexible spending accounts ("FSAs") and employee assistance plans ("EAPs").
For plan years beginning on or after January 1, 2014, practically speaking, employers will be prohibited from sponsoring a standalone HRA for active employees due to PPACA's prohibition on annual dollar limits and preventive service requirements. (Note: retiree-only HRAs are not subject to these provisions.)
According to the recent guidance, a standalone HRA for active employees can survive PPACA's prohibitions and requirements for group health plans only if the arrangement is "integrated" with a group health plan. An HRA is considered integrated if one of the two following integration methods is satisfied:
Integration Method #1 – Minimum Value Plan Not Required
- The employer offers a group health plan (other than the HRA) to its employees that provides more than just excepted benefits (e.g. dental, vision, etc.);
- The employee covered under the HRA is actually enrolled in a group health plan (does not have to be the group health plan sponsored by the employer);
- The HRA is available only to employees who are enrolled in a group health plan (other than an HRA);
- The HRA's reimbursements are limited to one or more of the following: copayments, coinsurance, deductibles and premiums under the group coverage, as well as medical care as defined under Internal Revenue Code section 213(d) that does not constitute essential health benefits; and
- Under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually, and upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of or waive future reimbursements from the HRA.
Integration Method #2 – Minimum Value Plan Required
An HRA that is not limited in the reimbursements as required under Integration Method #1 above will be considered integrated if:
- The employer offers a group health plan to the employee that provides "minimum value" pursuant to the Internal Revenue Code;
- The employee receiving the HRA is actually enrolled in a minimum value group health plan regardless of whether the employer sponsors the plan;
- The HRA is available only to employees who are actually enrolled in a minimum value health plan (regardless of the plan sponsor); and
- Under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually, and upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of or waive future reimbursements from the HRA.
The guidance further provides that a group health plan, including an HRA, used to purchase coverage on the individual market is not integrated with that individual market coverage for purposes of the annual dollar limit prohibition.
Employers who currently sponsor an HRA should work closely with their legal counsel to determine if the HRA is "integrated" under one of the two methods discussed above, and reconsider the offering of standalone active employee HRAs as a benefits strategy under PPACA or amend their HRA to become integrated.
Health FSAs
The Department of Labor clarified that PPACA's market reform provisions do not apply to "excepted benefits" which include health FSAs where (1) the employer also makes available group health plan coverage that provides more than just excepted benefits and (2) the health FSA is structured so that the maximum benefit payable to any participant cannot exceed two times the participant's salary reduction election for the health FSA for the year (or if greater, cannot exceed $500 plus the amount of the participant's salary reduction election).
EAPs
The guidance also clarifies that benefits under an EAP are considered "excepted benefits" and therefore, not subject to PPACA's market reform provisions, so long as the EAP does not provide significant benefits in the nature of medical care or treatment. Employers are permitted to use a reasonable, good faith interpretation of the facts to make this determination.
You can find a copy of this most recent guidance at http://www.dol.gov/ebsa/newsroom/tr13-03.html.