By Brian M. Pinheiro and Clifford J. Schoner of Ballard Spahr LLP
Continuing the furious pace with which it has been issuing health care reform guidance, on Aug. 19, 2011, the U.S. Department of Health and Human Services (HHS) issued guidance indicating that all health reimbursement arrangements (HRAs) that were in effect before Sept. 23, 2010, are exempt from the Patient Protection and Affordable Care Act’s prohibition against annual limits for plan years beginning on or after Sept. 23, 2010, and before Jan. 1, 2014.
Because an HRA is an account-based group health plan that limits a participant’s available reimbursement for a plan year to the value of his or her HRA account, it is virtually impossible for an HRA to comply with the annual limit prohibition.
Previously issued interim final regulations implementing the annual limit prohibition did not apply the prohibition to HRAs that were “integrated” with other group health plan coverage. Further, HRAs that are grandfathered or that provide only benefits to retirees or benefits excepted from the Act (e.g., limited-scope dental or vision plans) are not subject to the prohibition.
The remaining HRAs that had been subject to the annual limit prohibition are commonly referred to as “stand-alone” HRAs. Under the guidance provided by HHS, these HRAs now can continue being operated according to their terms through plan years beginning before Jan. 1, 2014, provided they were in existence on or before Sept. 23, 2010, even though the maximum reimbursement amount available to a participant for a plan year is limited to the value of a participant’s HRA account.
Brian M. Pinheiro is partner-in-charge of the Employee Benefits and Executive Compensation Group at law firm Ballard Spahr LLP.
Clifford J. Schoner is of counsel in the Business and Finance Department at the firm and a member of the Employee Benefits and Executive Compensation Group and Health Care Reform Initiative.
© 2011 by Ballard Spahr LLP. All rights reserved. Reposted with permission. Editor’s Note: This article should not be construed as legal advice.
HRAs Receive Exemption from Annual Limit Restrictions in Health Reform, Wolters Kluwer Law & Business/CCH, August 2011
HHS Grants Relief to HRAs with Respect to Annual Limit Restrictions – But Don’t Start Celebrating Yet!, Hitesman & Wold PPA, August 2011
Health Care Reform: Application of Annual Limit Restrictions to HRAs, WFL Legislative Brief/Zywave Inc., August 2011
SHRM Online Benefits Discipline
SHRM Online Health Care Reform Resource Page