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Stand-Alone HRA May Violate the Health Care Reform Law Without an HHS Waiver

Release Date: November 18, 2010

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The health care reform law severely restricts the ability of group health plans to impose annual dollar limits on benefits. Surprisingly, the new restriction applies to some health reimbursement arrangements (HRAs), even though virtually all HRAs have annual limits. Specifically, the new restriction applies to a "stand alone" HRA unless the HRA secures a waiver from the Department of Health and Human Services (HHS). The waiver application must be filed no later than 30 days before the start of the first plan year for which the new rules apply, so the application deadline for a calendar year plan is December 1, 2010. An HRA that is integrated with another health plan - such as a high deductible insured plan - is exempt from the new restriction and can continue to limit annual reimbursements.

The New Restriction on Annual Limits

The new health care reform law severely restricts the use of annual dollar limits on benefits paid by group health plans. Effective for plan years beginning on or after September 23, 2010, a group health plan - even if it is a grandfathered plan - can impose only “restricted annual limits” on benefits that are "essential health benefits." (See below for the meaning of this term). For example, annual limits on the dollar value of essential health benefits cannot be lower than $750,000 for the first plan year beginning on or after September 23, 2010. No annual limits on essential health benefits will be permitted for plan years beginning on or after January 1, 2014.

Effect on HRAs

Accordingly to regulations issued in June, a health reimbursement arrangement (HRA) is a group health plan that is subject to the new restriction on annual limits. It isn't clear whether Congress intended to subject any HRAs - almost all of which impose annual limits on reimbursable expenses - to this new rule, and, in fact, the HHS has asked for comments on the application of these limits to HRAs. 

"Integrated" HRAs Not Affected: The regulations issued in June 2010 provide that if an HRA is integrated with "other (health) coverage" that complies with the new rules on limits, the fact that HRA benefits are themselves limited will not violate the new rule. Thus, if an HRA is integrated with a high deductible or other health insurance arrangement, the annual limit under the HRA will not violate the law. It isn't clear what it means for an HRA to be "integrated" with an insurance arrangement, but if employees more...

If you have any questions on any aspect of health care reform, please contact Robert W. Patterson at 716.843.3910 or rpatterson@jaeckle.com, or Michele O. Heffernan at 716.843.3850 or mheffernan@jaeckle.com

This Jaeckle Alert, prepared by the attorneys at Jaeckle Fleischmann & Mugel, LLP, is intended for general information purposes only and should not be considered legal advice or an opinion on specific facts. For more information on these issues, contact one of the attorneys listed above or your existing Firm contact. Prior results do not guarantee a similar outcome. The invitation to contact is not a solicitation for legal work in any jurisdiction in which the contacted attorney is not admitted to practice. Any attorney/client relationship must be confirmed in writing. Copyright 2010 Jaeckle Fleischmann & Mugel LLP, Buffalo NY.   All Rights Reserved