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Life Health > Health Insurance > Health Insurance

Plain vanilla HRAs are safe

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The new Obama administration ruling on health reimbursement arrangements (HRAs) should leave intact most of the programs that benefits firms were actually planning.

Officials at the Internal Revenue Service (IRS) and the Employee Benefits Security Administration (EBSA) warned Monday that trying to give workers cash they could use to buy their own coverage would create what amounts to a group health plan with a low annual benefit limit. That low-limit plan would do nothing to help an employer get out of paying the new Patient Protection and Affordable Care Act (PPACA) employer mandate penalties.

Mark Holloway, a compliance specialist at Lockton, said today that the ruling should have no effect on the ordinary HRAs employers use to supplement major medical benefits.

The ruling will let an employer escape from the PPACA “play or pay” penalties by giving workers a choice between PPACA-compatible coverage and a cheaper, limited-benefit that would simply free a worker from the need to pay the individual coverage mandate penalty.

An employer could also offer workers a choice between PPACA-compatible coverage and cash they could use to buy their own coverage, Holloway said.

But employees who chose to take the cash would not qualify for the new PPACA premium assistance tax credits, Holloway said.

Garrett Fenton, a benefits lawyer at Miller & Chevalier, said he would still like to see federal regulators answer other questions about how employer-sponsored personal health account programs.

“There’s just no guidance on affordability,” Fenton said.

He wants to know, for example, what will happen to an employer that is trying to get out of paying the mandate penalties and signs up for a program that offers workers a chance to choose from a menu of plans.

He wonders whether, when looking at a multi-plan program, officials would decide a program was affordable enough for mandate penalty purposes by looking at the cost of the cheapest plan on the menu or by using some other method.

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