United States: Integrated Health Reimbursement Arrangements, Coordination With Family Coverage, And Notice 2015-87—Something's Missing

Last Updated: February 3 2016
Article by Alden J. Bianchi

Issued at the end of last year, Notice 2015-87 provided detailed guidance on a host of topics. The notice has been referred to colloquially in some quarters as the "pot luck" notice. Among other things, the notice, in Q&A 4, clarifies the circumstances under which a Health Reimbursement Arrangement (HRA) will be treated as "integrated" with a group health plan where the HRA covers spouses and dependents. This is important because an HRA that is not integrated—i.e., a "stand-alone" HRA—will trigger penalties under certain of the Affordable Care Act's (ACA) insurance market reforms. As is often the case, however, while clarifying some issues, the notice raised other issues that practitioners and agency representatives are now addressing, and which are the subject of this post.

According to Notice 2015-87, Q&A 4, an HRA is integrated with an employer's group health plan coverage for purposes of the application of the ACA insurance market reforms "only as to the individuals who are enrolled in both the HRA and the employer's other group health plan." (Emphasis added). Thus, the level of coverage that an employee elects under an integrated HRA, i.e., self-only, self + 1, family, etc., must match the level of coverage under the group health plan with which the HRA is integrated. While the concept seems simple enough, the text of the notice is less than clear as to which group health plan the HRA must be integrated with and the timing of the integration of spouse and/or dependent coverage. At a recent bar forum, representatives of the IRS and the Treasury Department (who were speaking in their individual capacities and not in any official capacity) offered their opinions on these issues and the intent of Q&A 4.

Background

At issue in Notice 2015-87, Q&A 4, is the application of the ACA annual dollar limit prohibition and preventive services requirement to HRAs. The issue was first raised (but not answered) in the preamble to the 2010 interim final regulations on the subject of lifetime and annual limits (at pages 37,190-191). The regulators subsequently settled the matter in Notice 2013-54, which established standards that, if satisfied, would qualify an HRA as "integrated" with a group health plan. An integrated HRA is deemed to piggy-back on the underlying group health plan's coverage and other features for purposes of complying with the ACA insurance market reforms. (For an extended discussion of Notice 2013-54 please see our Client Advisory of September 25, 2013.)

Notice 2013-54 was silent on the matter of who must be covered under the group health plan and the HRA. This question is raised in Notice 2015-87, Q&A 4, which asks:

"May an HRA available to reimburse the medical expenses of an employee's spouse and/or dependents (a family HRA) be integrated with self-only coverage under the employer's other group health plan?"

The answer is "No." But the balance of the answer does not align with the earlier notice in the following instances:

  • Notice 2013-54 says that an employee must have other group health plan coverage, sponsored either by his or her employer or a family member's employer, when amounts are credited to the employee's HRA account. Notice 2015-87 seems to say the integrated coverage must be maintained by his or employer.
  • Notice 2015-87 also says that in order for a family member's expenses to be reimbursed from the employee's HRA account, the family member must also have integrated coverage. The notice posits that the HRA can be "structured so eligibility for expense reimbursement will expand automatically when the family member has integrated coverage." Under Notice 2013-54, the employee must be enrolled in group health plan coverage when the employer credits amounts to the HRA. But under Notice 2015-87, it does not appear that the family member need be enrolled when the employer credits the HRA. For example, the employee could build up an HRA balance while enrolled in self-only coverage; he or she might subsequently switch to family coverage. This suggests that there is a different integration rule for employees than for family members—i.e., that a family member must have integrated coverage when his or her medical expense is incurred and not necessarily when the amounts used to reimburse the family member's expenses were credited to the employee's account.

As to the first bullet point, the government representative said that coverage under another group health plan of a different employer would qualify the HRA as integrated. They pointed out that this is the rule adopted in final regulations issued November 18, 2015 ("Final Rules for Grandfathered Plans, Preexisting Condition Exclusions, Lifetime and Annual Limits, Rescissions, Dependent Coverage, Appeals, and Patient Protections Under the Affordable Care Act"). The rules to which the government representatives refer are at Treas. Reg. §§ 54.9815-2711(d)(2)(i)(B) (governing plans that fail to provide minimum value) and 54.9815-2711(d)(2)(ii)(B) (governing plans that do provide minimum value). By way of example, Treas. Reg. § 54.9815-2711(d)(2)(i)(B) provides that an integrated HRA exists where:

"The employee receiving the HRA or other account-based plan is actually enrolled in a group health plan (other than the HRA or other account-based plan) that does not consist solely of excepted benefits, regardless of whether the plan is offered by the same plan sponsor." (Emphasis added).

As to the second bullet point, the government representatives offered an eminently reasonable approach: at no point should an employee, spouse or dependent be covered by the HRA and not by the employer's or other group health plan. Therefore, it appears that plan administrators will not be required to track HRA contributions to ensure that benefit payments to family members are being made from contributions credited to the HRA at a time during which the family member was actually covered. Though the matter of the impact of COBRA was not discussed, it appears that an employer could not offer a separate COBRA election for the integrated HRA, unless the employer maintained, and the HRA is properly structured as, a retiree HRA.

Notice 2015-87, Q&A 4, also recognizes the need for, and furnishes, transition relief under which Treasury and IRS will not treat an HRA available for the expenses of family members not enrolled in the employer's other group health plan for plan years beginning before January 1, 2016, as failing to be integrated with an employer's other group health plan for plan years beginning before January 1, 2016 (or for plan years beginning before January 1, 2017 where the HRA and group health plan would otherwise be integrated based on the terms of the plan as of December 16, 2015) "solely because the HRA covers expenses of one or more of an employee's family members even if those family members are not also enrolled in the employer's other group health plan." Thus, for plans with calendar year plan years, the rules governing HRA-coverage of spouses and dependents will not take effect until the 2017 plan year. As a result, there is some time for the regulators to clarify the questions raised above.

* * * * *

Special thanks to Robert F. Pizzo, Esq., Rochester, New York for initially raising the questions discussed in this post.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Alden J. Bianchi
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions