20 October 2016

HRAs and Medical Reimbursement Plans May Require Revision before 2017

Health Reimbursement Arrangements (HRAs) and self-funded medical reimbursement plans may need to be amended before 2017 in order to comply with Health Care Reform.

Health plans are subject to various market reforms of the Affordable Care Act (Health Care Reform). The market reforms include the prohibition on annual dollar limits with respect to essential health benefits. HRAs and medical reimbursement plans typically cap benefits at an annual amount which runs afoul of this rule. The penalty for non-compliance under Health Care Reform is $100 per day per affected individual.

However, if an HRA or medical reimbursement plan is “integrated” with employer group health coverage, then it can qualify as an “excepted benefit” to avoid the market reforms. In IRS 2015-87, the IRS added a new requirement for an HRA or medical reimbursement plan to be integrated. Specifically, if the HRA or medical reimbursement plan reimburses uninsured health expenses of a dependent (spouse or child), the dependent must also be enrolled in the employer’s group health plan that provides major medical coverage. If you maintain an HRA or medical reimbursement plan, it must be amended by no later than the first day of the 2017 plan year in order to satisfy this new requirement.

If you have any questions about this new requirement or need any assistance in making sure your HRA or medical reimbursement plan is properly amended, please contact the author or any other member of the Employee Benefits Practice Group.