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Employers are increasingly looking to consumer-driven health
plans (CDHPs) in an effort to control health insurance costs.
CDHPs generally combine a high-deductible health plan with a
tax-advantaged account, such as health reimbursement arrangement
(HRA), that enrollees can use to pay for otherwise uninsured health
care expenses. Proponents claim that CDHPs can help restrain
health care spending, arguing that the high deductibles and ability
to carry over balances give enrollees an incentive to seek
lower-cost health care services and to obtain services only when
necessary. Critics worry that these plans may
disproportionately attract healthier enrollees who use fewer health
care services or may discourage other enrollees from obtaining
necessary care.
With the arrival in 2014 of state-based and
federally-facilitated insurance exchanges under the Affordable Care
Act, CDHP proponents have touted a new approach under which an
employer makes available funds under a "stand-alone" HRA
(i.e., an HRA the is not coupled with a high deductible health plan
or any other plan for that matter) that employees can use to
purchase the coverage of their choice through one or more exchanges
in the employee's service area. Employers like this
design, since it does for health care what the 401(k) plan did for
retirement: it lends a degree of predictability to the
employer's costs. To CDHC critics, this and other
CDHC approaches are mere cost-shifting devices, under which
employees are burdened with an ever increasing proportion of
aggregate health insurance premiums.
Under current law, there is nothing to prevent an employer from
adopting a stand-alone HRA, but it makes little sense because
external insurance products are generally unavailable or
unattractive. The problem, of course, is that the individual
market coverage to which an employee has access is not yet subject
to important insurance market reforms under the Act. This
will change in 2014.
Under current law, stand-alone HRAs of the sort described above
would run afoul of the Act's ban on annual limits but for a
blanket waiver issued by HHS that expires in 2014. The
regulators will almost certainly be under a great deal of pressure
from employer groups to continue to provide an accommodation for
stand-alone HRAs thereafter. This will not be easy.
The Act defines "group health plan" with reference to
the section 2791(a) of the Public Health Service Act, which, in
turn, means "an ERISA employee welfare benefit plan to the
extent that the plan provides medical care." While there
is some case law might suggest otherwise, a stand-alone HRA is in
most instances a group health plan for purpose of the Act, and for
purposes of COBRA, HIPAA, GINA and other laws that are commonly
associated with traditional group health plans. There is also
the question of whether the insurance coverage purchased with
stand-alone HRA funds is individual market coverage or group
coverage. (Assuming no employer involvement, it would appear
that the former approach is the better view.) But make no
mistake—what appears to be a relatively straight-forward
business proposition is also a dense regulatory thicket.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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