Employers should think twice before cutting workers or retirees a check and shipping them off to use the exchanges.
The Employee Benefits Security Administration, an arm of the U.S. Department of Labor, has told employers and their brokers just that in Technical Release 2013-03.
In the release, EBSA officials explain how they believe the Patient Protection and Affordable Care Act (PPACA) applies to health reimbursement arrangements (HRAs), health flexible spending arrangements (FSAs) and other benefits programs.
EBSA officials say they will treat a stand-alone HRA as a group health plan.
PPACA will prohibit employer-paid plans from imposing annual or lifetime benefits limits.
If an employer tried to use either a stand-alone HRA or any other mechanism to give each worker a fixed amount of cash the worker could use to buy individual coverage, that would violate the PPACA ban on annual benefits limits, and offering the coverage would not help the employer comply with the new PPACA minimum coverage rules, officials write in the new technical release.
Because the stand-alone HRA would be a group health plan, it would have to offer the basic preventive services benefits package required by PPACA, without imposing cost-sharing requirements on the workers, even if the workers used their HRA money to buy individual policies that also covered the preventive services package.
An employer could use a standalone HRA to provide fixed amounts of cash that early retirees could use to buy individual coverage, but the early retirees would be ineligible for the new PPACA premium tax credit subsidies, officials said.
EBSA says the other agencies implementing PPACA — the Internal Revenue Service and the U.S. Department of Health and Human Services — will be releasing similar guidance.
Elsewhere in the guidance, officials said employee assistance programs that do not offer significant medical care benefits are exempt from the annual benefits limit ban.
Employers can still offer HRAs with limited annual benefits if the HRAs are integrated with group major medical plans, and the major medical-HRA package provides coverage without an annual benefits limit.