Federal officials have cleared up a question concerning health reimbursement arrangements (HRAs).
Members of the employee benefits and executive compensation group at Ballard Spahr L.L.P., Philadelphia, a law firm, discuss the move, by the U.S. Department of Health and Human Services (HHS), in a client alert.
The move – an HHS decision to grant temporary relief – applies to stand-alone HRAs affected by the annual benefits limits ban imposed by the Patient Protection and Affordable Care Act of 2010 (PPACA).
An HRA is an arrangement that gives employers and employees a way to save for an employee’s health care costs without paying taxes on the contributions. Unlike the holder of a health savings account, the holder of an HRA can use low-deductible or no-deductible health insurance.
Because employees and, in some cases, employers fund an HRA with set contributions, there is no way for an HRA program to comply with the PPACA ban on annual benefits limits.
HRA programs in effect before March 23, 2010, were grandfathered in, and HRA programs that are combined with major medical coverage or provide benefits outside the scope of the annual benefits limit ban, such as dental benefits, are exempted. But HHS left stand-alone, full-spectrum HRA programs founded after March 23, 2010, in a legal limbo.
Now, the Ballard Spahr lawyers say, HHS has given stand-alone HRAs some help: HHS says HRAs that were in effect before Sept. 23, 2010, are exempt from the PPACA annual benefits limit ban for plan years beginning on or after Sept. 23, 2010, and before Jan. 1, 2014.