On Oct. 12, 2017, President Donald Trump signed an executive order intended to change certain rules under the Affordable Care Act (ACA). The order would relax regulations on association health plans. This change could allow individuals and small businesses to purchase health insurance policies across state lines and avoid certain ACA requirements.
The executive order also directs the Departments of Labor, Health and Human Services, and the Treasury (Departments) to consider expanding the availability of low-cost short-term, limited-duration insurance and health reimbursement arrangements (HRAs).
The Affordable Care Act (ACA) imposes a fee on health insurance issuers and plan sponsors of self-insured health plans to help fund the PatientCentered Outcomes Research Institute. The fee, called the Patient Centered Outcomes Research Institute (PCORI) fee, is calculated based on the average number of lives covered under the policy or plan.
PCORI fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). These fees are due each year by July 31 of the year following the last day of the plan year. This means that, for plan years ending in 2016, the PCORI fees are due by July 31, 2017.
Due to the Affordable Care Act (ACA), most stand-alone health reimbursement arrangements (HRAs)—an HRA that is not offered in conjunction with a group health plan—have been prohibited since 2014. However, on Dec. 13, 2016, the 21st Century Cures Act (Act) was signed into law, which allows small employers that do not maintain group health plans to establish stand-alone HRAs, effective for plan years beginning on or after Jan. 1, 2017.
In an effort to respond to the rising cost of health insurance, many employers make use of tax-favored accounts such as health reimbursement arrangements (HRAs), health flexible spending accounts (health FSAs), and health savings accounts (HSAs) to offer consumer-driven health plans.
These accounts have grown in popularity because they offer potential health care cost savings to both employers and employees. For example, individuals covered under under one of these benefits are more likely to seek preventive care, choose generic drugs, not misuse the emergency room and use online tools to research health care and providers.
If you are considering implementing health reimbursement accounts (HRAs) or high deductible health plans (HDHPs) with HRAs, you should consider several things first, including your objectives and possible plan designs. Below are questions to think about if you are an employer considering HRAs or HDHP/HRAs.
You may use your Health Reimbursement Arrangement (HRA) to pay for medical care expenses that are incurred by you, your spouse or your dependents and are not reimbursed by your health plan.
These out-of-pocket expenses may include copayments, coinsurance and deductible amounts under your health plan and eligible medical care expenses that are not covered by your health plan.
Medical care expenses are amounts paid for the diagnosis, cure, treatment or prevention of disease, and for treatments affecting any part or function of the body. Also, to be an expense for medical care, the expense has to be primarily for the prevention or alleviation of a physical or mental defect or illness.
Health Reimbursement Arrangements (HRAs) are plans designed to help employers and employees lower health care costs. Allowed under sections 105 and 106 of the Internal Revenue Code, HRAs enable employers to reimburse employees for out-of-pocket medical expenses not covered by insurance. HRAs are often combined with high-deductible health plan coverage.