November 6, 2014
New FAQ Guidance Addresses Premium Reimbursement Arrangements
A new “frequently asked questions” (FAQ) document was released jointly by the U.S. departments of Labor (DOL), Health and Human Services (HHS) and Treasury on November 6, further clarifying that the offering of a premium reimbursement arrangement will not violate the market reform provisions of the Patient Protection and Affordable Care Act (PPACA) if it is integrated with a group health plan, but stating that such arrangements cannot be integrated with individual policies to satisfy the market reforms. The new FAQ guidance specifically addresses three scenarios as described below.
Under the previously released Internal Revenue Service (IRS) Notice 2013-54 and DOL Technical Release 2013-03 (described fully in the Council’s Benefits Blueprint summary and a Council Q&A piece), the regulatory agencies explained that employer health care arrangements – such as HRAs and employer payment plans – are group health plans and are subject to the group market reform provisions of PPACA, including the prohibition on annual limits and the requirement to provide certain preventive services without cost sharing. The earlier guidance clarified that such employer health care arrangements will not violate these market reform provisions when integrated with a group health plan that complies with such provisions. However, an employer health care arrangement cannot be integrated with individual market policies to satisfy the market reforms.
The newly released FAQ sets forth scenarios in which an employer offers its employees a premium reimbursement or similar arrangement for the purchase of individual insurance policies, and clarifies that they would fail to comply with the PPACA market reforms and could trigger penalties. These include instances in which:
- an employer offers employees cash to reimburse the purchase of an individual market policy, regardless of whether the employer treats the cash as pre-tax or post-tax to the employee.
- an employer offers employees with high-claims risk a choice between enrollment in its standard group plan or additional cash to opt out of the employer’s plan to purchase an individual policy. (The guidance states that such arrangements are discriminatory and the agencies intend to initiate rulemaking in the near future to further clarify.)
The guidance also states that the agencies have been informed that products are being marketed to employers claiming that employers can cancel their group policies, set up an Internal Revenue Code Section 105 reimbursement plan that works with health insurance brokers or agents to help employees select individual insurance policies, and allow eligible employees to access the premium tax credits for Marketplace coverage. The guidance clarifies that such arrangements are not permissible as they would violate the market reforms and, as group health plans, employees participating in such arrangements are ineligible for premium tax credits.
For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.