Big employers that use the new individual coverage health reimbursement arrangement (HRA) programs to replace traditional group health plans for permanent, full-time workers will have to make sure the employees can afford Affordable Care Act exchange plan, according to health care and labor lawyers at Foley Hoag LLP.
The lawyers — Thomas Barker, Christopher Feudo and Ross Margulies — talk about the individual coverage HRA funding issue in an alert analyzing the new individual coverage HRA regulations.
The Internal Revenue Service, the U.S. Department of Labor’s Employee Benefits Security Administration, and the U.S. Department of Health and Human Services published the final regulations in June.
Compliance specialists are still finding new wrinkles in the new regulations.
One is that employers big enough to be subject to the ACA “shared responsibility” rules, or employer coverage mandate rules, may have a harder time whether they have successfully avoided having to pay the ACA mandate penalties.
Normally, the lawyers write, an employee who was offered an individual coverage HRA would not be able to use an ACA exchange plan premium tax credit subsidy, and would not be able to lead to the IRS imposing employer coverage mandate penalties.
“If an individual is offered the HRA option, but declines it, the individual may be able to qualify for the credit if the HRA, when combined with individual market coverage, is unaffordable,’ the Foley Hoag lawyers write.
If full-time, permanent workers who decline individual coverage HRAs end up qualifying for the ACA exchange plan premium tax credit, the employer could end up facing employer mandate penalty bills.
The Foley Hoag lawyers note that how all of this will really work is unclear.