HRA's and Indemnity Plans Guidance

Yagents

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Ok, you legal eagles. Help me understand these new regs dropped on our laps on Friday. This is how I'm reading it:

1. Employer notifications of exchanges are delayed, and not required in March anymore.

2. HRA's integrated with a group plan are allowed and will avoid the ER penalty. BUT, HRA's that are tied to individual policies, do NOT satisfy employer requirements (for those over 50 EE's), and therefore would be subject to penalties. (if correct, there goes the HRA/private plans exchange model for larger employers).

3. Indemnity plans can NOT be paid on a per service basis (per dr visit), but instead on a per period basis (per day), and are allowed in conjunction with a group plan. Meaning, indemnity plans stand alone would not qualify to avoid the ER penalty.

4. Lastly, they are stating that the employer must pay at least 60% of the group health premiums, or EE can go get subsidies on the exchange. Does this replace the 9.5% of AIG requirement? Where are they getting this number from?

Here are the regs, please help me understand in layman's terms what the hell they are saying:

Affordable Care Act Implementation FAQs - Set 11 | cciio.cms.gov

FAQs About Affordable Care Act Implementation Part XI

Patient Protection and Affordable Care Act (All guidance from DOL)
 
#2 on DOL page:

If the employer plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through an Exchange; and
 
4. Lastly, they are stating that the employer must pay at least 60% of the group health premiums, or EE can go get subsidies on the exchange. Does this replace the 9.5% of AIG requirement? Where are they getting this number from?

#2 on DOL page:

If the employer plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through an Exchange; and

I don't think the 60% is about the employer's share of the premium. I think that is speaking about the Bronze level Actuarial Value, in which the group plan's share of the medical expenses must be at least 60%. If the employer's plan does not meet the Actuarial Value (AV) of Platinum/Gold/Silver or Bronze, and/or does not have all 10 EHB's, and/or does not meet MEC (minimum essential coverage) requirements, or if it has certain inside limitations, then it's not a qualified plan and the employee is eligible to apply for a subsidy in the exchange.
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2. HRA's integrated with a group plan are allowed and will avoid the ER penalty. BUT, HRA's that are tied to individual policies, do NOT satisfy employer requirements (for those over 50 EE's), and therefore would be subject to penalties. (if correct, there goes the HRA/private plans exchange model for larger employers).

I've been reading about these regs for a few days, and waiting for blogs or news releases from people who specialize in this sort of thing (like Zane benefits for instance), but so far I haven't seen enough to help me sort through the issues. InfiniSource is a TPA that I have a lot of respect for, and they issued a newsletter on it, but it didn't really clarify things enough.

I think there are several important points here.

First, as YAgents said, this really affects HRA's for larger employers over 50 FTE's, not small group or IFP.

This part of HHS's guidance really has to do with PHS Act Section 2711 that deals with the fact that a plan cannot be an Obamacare-approved QEHB if it has lifetime limits or certain dollar or annual limits.

One worry that employers had was whether their group plan that is an Obamacare-qualified QEHB would become disqualified if they attached an HRA that has iniside limitations. HRA's by default are set up to fund certain specific expenses. HHS is saying that if the HRA is not stand-alone and it is integrated with a QEHB health plan, then the fact that the HRA has inside limitations doesn't disqualify the employer from having a QEHB. Conversely, if the HRA is stand-alone or if it is available to employees who don't also enroll in the employer's QEHB, then it's not integrated and the large-group employer has some trouble with play or pay penalties.

The next part of HHS's guidelines said:
Q2: May an HRA used to purchase coverage on the individual market be considered integrated with that individual market coverage and therefore satisfy the requirements of PHS Act section 2711?

No. The Departments intend to issue guidance providing that for purposes of PHS Act section 2711, an employer-sponsored HRA cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies and therefore will violate PHS Act section 2711.​

This is what I'm waiting for others to comment about. I would not jump to the conclusion that it means employers cannot use an HRA to fund IFP premiums for their employees. I think it certainly says that larger employers with 50+ FTE's would not escape the "play or pay" penalty this way. I think it's also clarifying that an employer that offers an HRA + IFP plans is not establishing a QEHB group plan because HRA's cannot be integrated with the IFP market.

So, unless someone else tells me otherwise, I think it's still a real possibility that small group employers can still use HRA's if they wish to dump the group plan and just give their employees tax-deductible cash to buy insurance. I really think HHS will be dishing out further regs on this. If they take away the HRA method for small employers, there's still nothing wrong with an employer giving cash (taxable) to the employee instead of funding a group plan. If most of the employer's eligible employees would qualify for govt. subsidies, then it still may be the most viable method.
 
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Here is L&H's article on the topic (mostly about indemnity insurance), and it only speaks about in conjuction with a group major med. Standalone would still trigger a penalty I'm assuming:

Feds: Some "indemnity plans" come under PPACA | LifeHealthPro

This article references total "cost" to the EE:

http://www.medpagetoday.com/Washington-Watch/Reform/37030

If the employer plans to pay for less than 60% of the total cost of the health plans it offers to workers, then its employees may be eligible for a premium tax credit to purchase a qualified health plan through an exchange.
 
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So the HRA's are going down the path that most people thought they would. You can still use them for small group and the group faces no penalty.

Large group will pay penalty if they drop QHP and go strictly HRA for employees to get individual plans.
 
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My last post was confusing, so I'm deleting it and rewriting it.

Three years ago, when the govt defined actuarial value, it used the term "plan fails to provide minimum value if the plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs."

That was a badly written sentence, and caused lots of confusion. Some people thought it meant the employer had to pay 60% of the premium. It does not.

You can see that the wording is very similar to the one in HHS's document released recently. YAgents gave this link FAQs About Affordable Care Act Implementation Part XI, and the quote appears as item #2 under the heading Notice of Coverage Options Available Through the Exchanges

I've added my comments in parenthesis & italics in this quote to try to give it some clarity:
"If the employer plan's" (meaning the group plan's) "share of the total allowed cost of benefits provided under the plan" (meaning the benefits) "is less than 60% of such costs" (meaning less than Bronze level)...

Here is a link to a really good explanation of that badly-written wording back in 2010 when the definition of Bronze minimum value first came out, and many people worried that it meant the employer had to pay 60% of the premium:

Can you clarify what “employer does not offer to pay at least 60% of benefits” means? Does that mean there must be a 60/40 premium cost-share or does it not have anything to do with the premium?
In order to be eligible for a premium or cost-sharing subsidy, an individual who has access to an employer plan must demonstrate, among other things, that the “plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.” While the Act is not entirely clear, we understand from our informal discussions with IRS and Treasury representatives that this calls for an actuarial calculation that starts with the anticipated costs for all benefits without regard to any co-pays, deductibles and coinsurance. This is the “100%” (i.e., the “total allowed costs of benefits”) that is multiplied by 60% to establish the employer contribution amount. We will know more about the particulars once regulations are issued.​

Health Care Reform Advisory: FAQs: Health Care Reform and Employee Benefits

and finally, here is a link to the IRS definition of it, and in the very first paragraph they use the same wording to mean the minimum value allowed (Bronze level).

This notice describes and requests comments on several possible approaches to determining whether health coverage under an eligible employer-sponsored plan, as defined in § 5000A of the Internal Revenue Code (“employer-sponsored plan”), provides minimum value within the meaning of § 36B(c)(2)(C)(ii). Beginning in 2014, eligible individuals who purchase coverage under a qualified health plan through an Affordable Insurance Exchange may receive a premium tax credit under § 36B unless they are eligible for other minimum essential coverage, including coverage under an employer-sponsored plan that is affordable to the employee and provides minimum value. Under § 36B(c)(2)(C)(ii), a plan fails to provide minimum value if “the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.” If the coverage offered by the employer fails to provide minimum value, an employee may be eligible to receive a premium tax credit.​
http://www.irs.gov/pub/irs-drop/n-12-31.pdf

So, it does NOT mean the employer has to pay 60% of the total group premium. It means the Bronze level of minimum value must be at least 60% of the total allowed medical costs or else it doesn't qualify.
 
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Ann, I knew I could count on you!!

Thanks, Bill. But let's not let this thread die until we clarify the other issues. In your original post, you mentioned 4 items to clarify. The 1st is easy - HHS is delaying the exchange notifications "until the summer or fall" because HHS, IRS & DOL don't have their facts together yet. No kidding! The issue of indemnity plans is interesting, and will make those "near major medical" plans more difficult. And the issue of HRA's is really important, and I would like to hear more from other posters about their take on that.
 

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