FAQs published by the Federal agencies on January 24, 2013 clarified that employer sponsored Health Reimbursement Arrangements (HRAs) that are offered on a “stand alone” basis (i.e., not in connection with other health coverage) must comply with the ACA prohibition on annual or lifetime dollar limits on coverage. Because, by definition, an HRA limits the amount of benefits a participant may receive based on the amount of credits the employer makes available, an HRA alone cannot comply with the requirement to offer unlimited coverage.
When an HRA is integrated with other group health plan coverage, as long as the two together provide unlimited coverage, the fact that benefits under the HRA by itself are limited does not violate the law. The FAQs also provide that, if the employer offers both an HRA and health coverage but the employee fails to enroll in the employer’s coverage, the HRA will fail to comply with the law unless the plan allows the participant to prove coverage under another group health plan that provides unlimited coverage. (This would also prohibit an arrangement where the employer provides HRA credits to individuals who opt out of major medical coverage without proof of other compliant group health plan coverage.) Finally, the FAQs clarified that a standalone HRA used to purchase individual market coverage does not comply with the rule prohibiting annual or lifetime limits even if the purchased individual coverage does comply with the rule.
From a practical standpoint, this means that stand alone HRAs are no longer allowed for active employees without proof of other compliant group health plan coverage. Further guidance clarifies that, whether or not offered on a standalone basis, unused amounts credited before January 1, 2014 under the terms of an HRA in effect on January 1, 2013 may continue to be used by participants. Retiree only HRAs (with fewer than two current employees) are exempt from the ACA plan design mandates so are still allowed on a standalone basis.