Employers of All Sizes May Get to Offer Workers 'Cash for Coverage'

2. An individual health insurance purchase HRA could offer some new perks.

The holder of such an HRA who found inexpensive major medical coverage might be able to carry over an unlimited amount of unused HRA value to the following year.

If an employee needed to spend cash on top of the HRA money to pay the individual major medical premiums, the employee could pay the employee’s share of the premiums through a payroll deduction program provided through a cafeteria plan.

3. An individual health insurance purchase HRA could come with many restrictions.

One provision in the draft regulations would let an employee opt out of a health insurance purchase HRA if the arrangement would make purchasing coverage with a minimum value unaffordable.

In that case, the employer could end up having to pay a penalty if the employee ended up qualifying for an Affordable Care Act public exchange premium tax credit subsidy.

Here are some of the other requirements and restrictions:

• An employer could not offer a health insurance purchase HRA and a traditional group health plan to the same group of employees.
• Participation in a health insurance purchase HRA would have to be voluntary, because the purchase of individual health coverage would have to be voluntary.
• Any employee who did participate in a health insurance purchase HRA would have to have individual major medical coverage.
• An employer could offer older employees higher HRA amounts, to reflect age-based health coverage pricing differences, but an employer could not use any means to offer sicker employees and healthier employees different HRA benefits.
• An employer, employee organization or other plan sponsor could not select or endorse any particular issuer or insurance coverage, and the sponsor could not receive cash compensation tied to an employee’s selection or renewal of coverage.

4. An individual health insurance purchase HRA would not necessarily do anything to make suitable, affordable coverage show up.

Regulators have proposed letting employers offer individual health coverage purchase HRAs, but their draft regulation would do nothing to require any health insurer to sell HRA-compatible coverage.

6. The proposed excepted benefit HRA could be used to pay for short-term health insurance premiums.

Officials have suggested that an employer could offer an individual health coverage purchase HRA, and also a separate HRA for purchasing “excepted benefits.”

Excepted benefits are health-related benefits, such as dental insurance and vision insurance, that fall outside the scope of federal major medical insurance laws, such as the Employee Retirement Income Security Act (ERISA), the health benefits requirements in the Health Insurance Portability and Accountability Act (HIPAA), and the major medical insurance requirements in the Affordable Care Act.

Officials have suggested capping the annual amount an employer could make available through an excepted benefits HRA at $1,800, with the amount indexed for inflation.

An employer could offer an excepted benefit HRA only if it also offered an employee a traditional group health plan. That means that, under the rules in the proposal, the same employer could not offer both an individual health purchase HRA and an excepted benefit HRA to the same employee.

Although an employer would have to offer traditional health coverage to an employee offered an excepted benefit HRA, the employee could use the excepted benefit HRA without taking up the traditional health coverage.

Because short-term health insurance is an excepted employee, an employee could use excepted benefit HRA cash to pay for short-term health insurance.

An employee who refused to take up the group health coverage could, apparently, use excepted benefit HRA money to pay short-term health insurance premiums.

6. An excepted benefit HRA could turn out to be an alternative to flexible spending arrangements (FSAs).

The contribution limit for an excepted benefit HRA would be a low, but, under the rules given in the draft regulations, the holder of an excepted benefit HRA could carry over an unlimited amount of unused account value to the following year.

7. Members of the public can weigh in on the draft regulations.

Comments on the draft regulations are due Dec. 28.

One way members of the public can comment is by visiting the federal government’s Regulations.gov website.

Officials have asked for comments on a number of specific technical issues, such as how to predict the impact of the proposal on the cost of coverage and the number of people with coverage.

Officials have also asked for ideas about how new HRA rules should be implemented, and what kinds of special enrollment periods or other arrangements might be needed.

— Read Texas Applies Group Rules to Individual-Policy Programs, on ThinkAdvisor.

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