Last week the Departments of Treasury, Labor, and Health and Human Services (the “Agencies”) published final regulations regarding individual coverage health reimbursement arrangements (ICHRAs). In general, ICHRAs are health reimbursement arrangements (HRAs) or other account-based group health plans that are integrated with a health insurance policy issued in the individual insurance market (or Medicare) for purposes of complying with certain requirements under the Patient Protection and Affordable Care Act (ACA). During the Obama administration, the Agencies had taken the position that an HRA could be integrated only with group health plan coverage for purposes of satisfying the ACA’s requirements and specifically could not be integrated with individual health insurance policies. The new regulations reflect a significant change in course at the Agencies and expand an employer’s ability to use an HRA as a method of providing health benefits to its employees by allowing integration with individual health insurance policies.
ICHRA Requirements. The final regulations impose a number of different requirements an ICHRA must satisfy. An HRA that does not satisfy these requirements and is not otherwise exempt from or compliant with the ACA will violate the ACA and may trigger penalties for the employer under the Internal Revenue Code or the Public Health Services Act.
No Offer of Traditional Group Health Coverage. The final regulations do not allow an employer to offer both the ICHRA and a traditional group health plan to the same employees. A traditional group health plan generally includes any group health plan other than plans consisting solely of excepted benefits (e.g., dental plans, visions plans, most health FSAs, etc.).
Important: Employees cannot be offered a choice between coverage under the ICHRA and traditional group health coverage.
An employer may, however, offer an ICHRA and a traditional group health plan to different groups of employees in accordance with certain requirements contained in the final regulations.
Other Coverage Requirement. In order to participate in the ICHRA, covered individuals (employees and their dependents) must be enrolled either in individual health insurance or Medicare Parts A and B or C.
Note: Enrollment in Medicare Part A by itself is insufficient. The individual must have both Medicare Parts A and B or Medicare Part C.
Note: It appears the opportunity to pay individual health insurance premiums through the cafeteria plan might be available only if a portion of the premiums are reimbursed through the ICHRA (i.e., only if the cafeteria plan supplements the ICHRA).
Opt Out Requirement. Like with HRAs integrated with a group health plan, participants must be given an opportunity to opt out of the ICHRA for themselves and all dependents.
ICHRA Must Be Offered on Same Terms. If an employer offers an ICHRA to a class of employees (see above), then the ICHRA must be offered to all employees in that class on the same terms.
Eligible Expenses. As with HRAs in general, an ICHRA can reimburse all 213(d) medical expenses.
Notice Requirements. Employers must distribute a notice to each employee who is eligible for the ICHRA annually at least ninety (90) calendar days before the start of each plan year.
Note: Employers intending to adopt an ICHRA effective January 1, 2020, must distribute the first notice no later than October 2, 2019.
Impact of ICHRAs on Premium Tax Credits and Employer Mandate.
ERISA Concerns. Like HRAs in general, an ICHRA is an ERISA employee benefit plan unless it qualifies as a governmental or church plan. The DOL clarified in the final regulations that individual health insurance policies, the cost of which is paid or reimbursed through an HRA (including an ICHRA) or through a Section 125 plan, will not become ERISA benefit plans due to the fact the premiums have been paid or reimbursed through that plan. However, the arrangement must satisfy the following conditions:
Effective Date. The final regulations become applicable on January 1, 2020. Employers may establish ICHRAs effective as of that date. In order to determine whether an ICHRA is appropriate for an employer and to implement the ICHRA in a timely manner, an employer considering an ICHRA for January 1st needs to begin evaluating and planning now.
Please contact us if you have any questions about ICHRAs.
 The final regulations also address another type of HRA, referred to as an excepted benefit HRA. We will be addressing excepted benefit HRAs in a subsequent client alert to be issued in the near future.
 Such HRAs include HRAs integrated with a group health plan pursuant to prior guidance from the Agencies, HRAs providing only excepted benefits (e.g., dental and vision care reimbursements), HRAs covering fewer than two current employees (e.g., retiree HRAs), and the new excepted benefit HRAs.
As a leader in employee benefits law, Darcy Hitesman founded Hitesman & Wold in order to help public and private employers, insurers and third-party administrators nationwide stay informed and minimize the risk of non-compliance issues.
Hitesman & Wold provides a wealth of legal experience to their clients in the areas of ERISA, COBRA, HIPAA, Health Care Reform, welfare plans, cafeteria plans, HRAs, and VEBAs.
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