DOL, IRS and HHS Issue Proposed Rules to Bolster Health Reimbursement Arrangements

Author: Robert S. Teachout, XpertHR Legal Editor

November 2, 2018

The US Department of Labor, jointly with the IRS and the Department of Health and Human Services, released proposed rules for Health Reimbursement Arrangements. The proposed rules were in response to President Trump's Executive Order promoting healthcare choices outside of the Affordable Care Act, which included allowing small businesses to join association health plans.

A Health Reimbursement Arrangement (HRA) is an employer-established benefit that lets employees receive tax-free reimbursements of qualified medical expenses up to the maximum dollar amount in the coverage period. An HRA is funded solely by the employer and may be offered in conjunction with other employer-provided health benefits. Contributions through a voluntary salary reduction agreement with employees are prohibited.

The proposed rules would:

  • Allow HRAs to be integrated with certain types of¬†individual health insurance coverage;
  • Set conditions under which certain HRAs would be recognized as limited excepted benefits;
  • Provide premium tax credit eligibility for employees offered coverage under certain HRAs that are integrated with individual health insurance coverage; and
  • Clarify to plan sponsors that, when premiums are reimbursed by an HRA or a qualified small employer health reimbursement arrangement, individual health insurance coverage does not become part of an ERISA plan.

The departments stated in their release that the "proposed rules are intended to increase the usability of HRAs to provide more Americans, including employees who work at small businesses, with additional healthcare options."