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Feds set cash-for-premium plan rules

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The Obama administration has started fleshing out the new federal law that created the qualified small employer health reimbursement arrangement, or QSEHRA.

Related: Obama signs small-group cash-for-premiums plan bill

Officials at the U.S. Department of Labor, the U.S. Department of Health and Human Services and the U.S. Treasury Department talk about how a QSEHRA program should work in a set of answers to frequently asked questions about implementing the Affordable Care Act. 

Meet the QSEHRA

Years ago, some benefit plan administrators offered premium-only plans, or help with giving workers cash the workers could use to buy their own health coverage.

One obstacle was medical underwriting. Many workers were too old, too sick or too overweight to qualify to buy individual coverage at standard rates.

The Affordable Care Act eliminated the medical underwriting obstacle in January 2014, by banning use of personal health status information in the health insurance sales process. But Obama administration officials and some health insurers feared that employer access to premium-only plans would hurt sales of ACA exchange plans, or destabilize either the individual market or the group market, by causing workers to flow between the individual market and the group market in unpredictable ways.

Obama administration officials tried to block use of premium-only plans by declaring that use of stand-alone health reimbursement arrangements, or similar arrangements, to pay workers’ individual health insurance premiums would create a group major medical plan. The stand-alone HRA would have to meet all of the requirements that apply to group major medical plans, such as the requirement that the plans cover essential health benefits without imposing annual or lifetime limits on the benefits, according to administration interpretations. 

The administration agreed to hold off on enforcing the ban, but regulatory uncertainty discouraged the sale of new premium-only plans.

Supporters of premium-only plans overcame that resistance by getting a QSEHRA provision into the 21st Century Cures Act package, a popular medical research bill. President Obama signed the package into law Dec. 13.

The QSEHRA section of the law will let a small employer use a health reimbursement arrangement to reimburse an employee for up to $4,950 in premiums for self-only major medical coverage, and up to $10,000 in premiums for family coverage.

One question has been how practical offering QSEHRAs for 2017 will be, given that the ordinary open enrollment period for major medical coverage for 2017 is set to end Jan. 31.

The guidance

In the guidance, Obama administration officials do not discuss individual major medical open enrollment period timing issues.

Officials focus, instead, on emphasizing the limits of the QSEHRA program.

An employer can use a QSEHRA to pay for major medical coverage, but an employer cannot use a QSEHRA to reimburse an employee for other types of medical expenses, officials say.

Current federal rules let employers use HRAs together with ordinary group health plans, to help employees fill in benefits gaps.

Old batches of guidance classify stand-alone HRAs as group health plans still apply.

The old batches of guidance still apply to any stand-alone HRA that is not a QSEHRA, officials say. If a stand-alone HRA is not a QSEHRA, and it helps employees pay for health care, then it will have to meet the ACA requirements that apply to group health plans, officials say.

But a new presidential administration will take office Jan. 20, and it’s not clear whether Trump administration officials would have to use the guidance, or for how long.

The next administration may also have flexibility to ease any individual major medical open enrollment period deadline problems that interfere with use of QSEHRAs.

The Obama administration has frequently postponed individual major medical enrollment deadlines because of concerns about technical glitches and call center access delays. The administration has also created many new categories of special enrollment periods. Trump administration agencies could use general enrollment period deadline changes or new special enrollment periods to help QSEHRA users.


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