The proposed regulations would expand HRA compatibility into the individual market by adding an individual health insurance premium reimbursement, allowing companies to provide funds to assist their employees with paying for individual health plans on a pre-tax basis. In addition, the proposed regulations add an “excepted benefit HRA” that generally allows up to $1,800 per year (plus carryover amounts) to be used for out-of-pocket medical expenses or premiums for excepted benefit coverage. This would include dental and vision coverage, COBRA premiums, and short-term limited-duration insurance, as long as the employee is eligible to participate in the group health plan.
It’s important to note that employers wishing to offer this type of HRA cannot also offer a traditional group insurance plan to the same class of employees. In other words, the employee is not able to choose between this proposed HRA and a traditional group plan; only one may be offered to them. The HRA must also be offered with the same terms to all employees within the same class, with some exceptions based on the member’s age and the number of covered dependents.
Employers who offer this type of HRA would require employees wishing to participate to enroll in an individual health plan and find a reasonable way to substantiate employee enrollment in a plan. Employers would also need to provide a notice to all eligible employees regarding the HRA provisions at least 90 days before the start of each plan year.
Employees who would opt out of the integrated HRA with an individual health plan could lose eligibility for premium tax credits on plans purchased through the exchange in any month in which the HRA is affordable and provides minimum value, or any month in which they are in enrolled in an HRA. The new regulation provides a formal basis for determining whether the HRA is affordable. If an HRA is found affordable, it would also be deemed as providing minimum value.
The proposed regulations are set to be reviewed at the end of December 2018, and if finalized, would take effect for plan years beginning on or after January 1, 2020. The regulations could provide employers of small and mid-sizes a tax-deferred opportunity to subsidize employee health care in a way other than traditional employer-sponsored group plans. Additionally, the new regulations could be of benefit to employees electing individual plans, as the coverage is owned by the employee and is not affected if he or she should choose to leave the employer and no longer had the HRA coverage. It is important to note that the new regulations do not affect the tax treatment of traditional employer-sponsored plans.
Read more about the proposed HRA regulations here, here, or here. You can also contact your Fall River Account Manager for more information.
