August 24, 2011 - HHS Grants Relief to HRAs With Respect to Annual Limit Restrictions – But Don’t Start Celebrating Yet!
On August 19, 2011, the Department of Health and Human Services issued new guidance regarding health reimbursement arrangements (“HRAs”) and the need to seek waivers from the annual limit restrictions under the Patient Protection and Affordable Care Act (“PPACA”). The new guidance addresses HRAs otherwise subject to the wavier requirement.
Caution: Not all HRAs are subject to the annual maximum limitation (e.g., HRAs that qualify as excepted benefits for purposes of HIPAA Portability requirements). If not subject to the limitation, there is no need to request a waiver from its application. In addition, some HRAs have been exempted from the annual maximum limitation by regulation (e.g., HRAs integrated with major medical plans that are subject to the annual maximum limitation). They also do not require a waiver. For additional information regarding HRAs, the application of the annual maximum limitation, and the need for waivers, please see our November 3, 2010 Client Alert on the topic, available here.
Under the new guidance, all HRAs established prior to September 23, 2010, which were otherwise subject to the annual maximum limitation, have been granted a waiver without the need to actually request the waiver. Theywill be treated as if they requested and received a waiver from the annual maximum limitation.
Caution: The new guidance does not provide an exemption from the annual limit restrictions. The exemption is only from the requirement to apply for a waiver from the annual limit restrictions.
In light of the guidance, there is no longer a need to determine whether an HRA is integrated or not integrated, retiree only, etc. for the purpose of requesting a waiver. HRAs established prior to September 23, 2010, which are otherwise subject to the annual maximum limitation,do not need to apply for a waiver or an extension of a previously granted waiver. They have been granted a waiver for all plan years beginning prior to January 1, 2014.
Note: However, the guidance makes clear that such HRAs must still comply with the record retention and annual notice requirements applicable to plans receiving the waivers. Those requirements are described in prior guidance available at the waiver website: http://cciio.cms.gov/programs/marketreforms/annuallimit/index.html.
Unfortunately, the new guidance leaves several key issues unresolved:
- For HRAs established prior to September 23, 2010, what happens in 2014? Will they then be fully subject to the annual limit restrictions? Will there be an exemption from the requirement itself?
- What about HRAs established on or after September 23, 2010? Because there is no ability to request or obtain a waiver from the annual limit restrictions, are “new” HRAs in violation? If you amend a plan that was in existence prior to September 23, 2010, to now provide HRA features, does the waiver apply?
- What about insurance policies designed to accomplish the same result as an HRA integrated with a major medical plan? They operate like integrated HRAs but are they covered by the guidance?
- What about self-insured medical expense reimbursement plans (a/k/a MERPs) designed to accomplish the same result as an HRA integrated with a major medical plan (i.e., pay expenses that but for the deductible or other cost sharing provisions would be paid under the major medical plan)? They operate like integrated HRAs but are they covered by the guidance?
Unless and until HHS or Congress provides an exemption from the annual limit restrictions themselves for all HRAs, these issues remain open.
Please contact us if you have any questions regarding HRAs and the annual limit restrictions or if you need assistance complying with the record retention and/or notice requirements for waiver recipients.
The information contained in this ALERT is intended for general information purposes only and does not constitute legal advice relative to a specific situation.