The Departments of the Treasury, Labor, and Health and Human
Services recently issued proposed regulations on health reimbursement arrangements. These arrangements used to be penalized but have recently been
restored. For those not familiar with health reimbursement arrangements, often
referred to simply by HRAs, they are account-based group health plans that take
their funding from employer contributions. These contributions are then used to
reimburse workers for their health care costs.
New rules and regulations introduced were done so with the
intent of making HRAs more useable and with making them easier to offer for
employers. Under the new rules, HRAs can also now be used with nongroup health
insurance coverage.
If approved, the proposed rules would also do away with
premium tax credit rules, thereby making it possible for employees with HRAs to
be eligible for this credit.
Concerns About HRAs
The big worry about HRAs has long been that employers would
encourage their high-risk employees, meaning those employees most likely to
have costly medical claims, to get health insurance exchange insurance, thereby
making the individual health insurance market less stable and unduly affected.
The good news is that the new rules, if accepted,
effectively address this risk. They would prevent a plan sponsor from steering
high-risk employees away from the traditional group health plan. This would be
accomplished by preventing plan sponsors from offering employees at the same
class both a traditional group plan and an HRA. Also, the HRA would have to be
offered to all employees within the same class on the same terms.
These rules are considered by most to be big improvements
that will ultimately help people and the health insurance marketplace as a
whole. If you are confused about how they may affect you, however, be sure to
speak with a qualified tax professional and to stay abreast of any news related
to these proposed regulations.