United States: 21st Century Cures Act Overrules IRS Guidance On HRAs, Enhances Enforcement Of Mental Health Parity Act

Reprinted with permission from Employee Benefit Review – February 2017

The 21st Century Cures Act (CCA), which passed with strong bipartisan support in the House of Representatives and the Senate in early December, was signed into law by President Obama on December 13, 2016. While the CCA includes important initiatives relating to heroin and prescription opioid addiction and cancer and biomedical research, it also reverses IRS guidance with respect to certain health reimbursement arrangements and takes important steps to enhance the enforcement of the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA).

Health reimbursement arrangement

Prior guidance

In Notice 2013-54, the Internal Revenue Service issued guidance on the application of certain provisions of the Affordable Care Act (ACA) to health reimbursement arrangements (HRAs) and other arrangements under which an employer reimburses an employee for premium expenses incurred for an individual health insurance policy. The IRS held that such reimbursement arrangements were group health plans subject to the ACA requirements prohibiting annual limits on the dollar amount of benefits and requiring the provision of preventive services. Most, if not all, reimbursement arrangements did not comply with the ACA.

In 2014, the IRS issued Q&As which described the consequences if a reimbursement arrangement violated the requirements of the ACA. The IRS stated that reimbursement arrangements that imposed an annual dollar limit and/or did not provide preventive services would be subject to a $100 per day excise tax per each applicable employee, i.e., $36,500 per year per employee, under Section 4980D of the Internal Revenue Code.

The practical result of Notice 2013-54 and the Q&As was the demise of numerous arrangements under which employers reimbursed employees for premiums paid for health insurance that was not integrated with health coverage provided by the employer.

In Notice 2015-17, the IRS granted transition relief for employers that did not qualify as "applicable large employers" under the ACA. Under the Notice, during the specified transition period ACA penalties did not apply to HRAs maintained by small employers that provided reimbursement of insurance premiums. The transition period ended on June 30, 2015. The transition relief did not apply to applicable large employers or to HRAs that reimbursed medical expenses other than insurance premiums.

Impact of CCA

The CCA reverses Notice 2013-54 by authorizing employers that don't qualify as applicable large employers, i.e., employers with less than 50 full-time employees and full-time equivalents, to maintain certain reimbursement arrangements without incurring the $100 per day per employee penalty for failing to comply with the ACA.

The CCA provides that a "qualified small employer health reimbursement arrangement" (QSEHRA) does not constitute a group health plan for purposes of the requirements of the ACA.

A QSEHRA is defined as a reimbursement arrangement that:

  • is provided by an eligible employer;
  • is funded solely by such employer (and not by employee salary deferrals);
  • is provided on the same terms to all eligible employees;
  • provides for the payment of, or reimbursement of medical expenses incurred by the eligible employee or his or her family members; and
  • includes a limit on the total amount of reimbursements for a calendar year that does not exceed $4,950 (or $10,000 in the case of a QSEHRA that also reimburses the medical expenses of family members of the eligible employee).

For purposes of these requirements an "eligible employer" is defined as employer that (i) is not an "applicable large employer" as defined under the ACA (i.e., less than 50 full-time employees and full-time equivalents), and (ii) does not offer a group health plan to any of its employees. An "eligible employee" is defined as any employee of an eligible employer. However, an employer may exclude the following employees from participation in the QSEHRA:

  • employees who have not completed 90 days of service;
  • employees who have not attained age 25; and
  • part-time or seasonal employees.

A reimbursement arrangement will not fail to be a QSEHRA because an employee's benefit varies in accordance with the variation in the price of an insurance policy in the applicable health insurance market based on (i) the age of the employee or his family members, or (ii) the number of family members which are covered under the arrangement. However, any such variation in price must be determined by reference to the same insurance policy with respect to all eligible employees.

If an individual is not covered by a QSEHRA for the entire year, the annual reimbursement limitation is prorated based on the number of months during the year that the individual is covered.

Beginning in 2017, the annual reimbursement limitation will be adjusted for inflation.

Benefits provided under a QSEHRA are excludable from gross income only if the eligible employee has minimum essential coverage as defined under the ACA. In addition, any credit otherwise allowable under the ACA is reduced by the amount of reimbursements under an QSEHRA.

Not later than 90 days before the beginning of the year, an employer must provide written notice to all eligible employees which includes the following information with respect to the QSEHRA:

  • the maximum amount of expenses eligible for reimbursement under the QSEHRA during the year;
  • a statement that the eligible employee should provide information regarding the maximum amount of reimbursement expenses to any ACA health insurance exchange to which the employee applies for advance payment of the premium assistance tax credit; and
  • a statement that if the employee is not covered under minimum essential coverage for any month, the employee may be subject to the ACA individual penalty for such month and that reimbursements under the QSEHRA may be includible in gross income.

In the case of an employer who is not eligible to participate in the QSEHRA, such notice must be provided before the date on which such employee becomes eligible to participate. A penalty of $50 per employee per incident of failure to provide a notice applies to an employer failing to satisfy the QSEHRA notice requirement, subject to a maximum penalty of $2,500 during any calendar year.

Enforcement of Mental Health Parity and Addiction Equity Act

Compliance guidance

The CCA also modifies the terms of the MHPAEA to enhance enforcement efforts. The CCA directs the Departments of Health and Human Services, Labor, and Treasury to issue a compliance guidance document with the goal of improving compliance with the MHPAEA. Such compliance guidance document must include examples of previous findings of compliance and noncompliance, including examples illustrating requirements for information disclosure and non quantitative treatment limitations, as well as descriptions of the violations uncovered during the course of MHPAEA investigations. With respect to examples relating to non quantitative treatment limitations, the examples must include sufficient detail to explain a finding of compliance or noncompliance, including a description of the criteria for approving medical and surgical benefits as compared to the criteria for approving mental health and substance use disorder benefits. Finally, the compliance guidance document must include compliance recommendations

To assist in the development of the compliance guidance document, the CCA directs the Secretaries of Health and Human Services, Labor and the Treasury to enter into interagency agreements with each other and with the States for the purpose of sharing findings of compliance and noncompliance under the MHPAEA. The compliance guidance document must be updated every two years to update compliance information.

    Disclosure guidance

The CCA also directs the Secretary of Labor and the Secretary of the Treasury to issue guidance to group health plans and health insurance insurers to assist such plans and issuers in satisfying the disclosure requirements under the MHPAEA. The guidance must include clarifying information and examples of methods that plans and insurance issuers may use to provide information to participants, beneficiaries, contracting providers or authorized representatives as required under the MHPAEA. Such guidance must include comparative information with respect to:

  • non quantitative treatment limitations for both medical and surgical benefits and mental health and substance disorder benefits;
  • the processes, strategies, evidentiary standards and other factors used to apply such limitations; and
  • how the plans or policies ensure that such limitations are applied in parity with respect to medical and surgical benefits and mental health and substance use disorder benefits.

MHPAEA Enforcement Action Plan

Within six months after the enactment of the CCA, the Secretary of Health and Human Services must convene a public meeting that includes the Departments of Health and Human Services, Treasury, Labor and Justice, as well as representatives from the States, to develop an action plan for MHPAEA compliance. The action plan must be finalized within six months of such meeting. The content of the action plan must include, among other things, objectives regarding how Federal and State agencies can cooperate to improve enforcement of the MHPAEA and recommendations to Congress regarding the need for additional legal authority to improve enforcement of the MHPAEA.

     Other directives

The CCA also requires an annual report on investigations under the MHPAEA with findings of any serious violations for the next five years, a GAO study on parity in mental health and substance use disorder benefits within three years after the enactment of the CCA, and development of information and awareness programs on eating disorders, as well as education and training of health professionals with respect to eating disorders.

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
Similar Articles
Relevancy Powered by MondaqAI
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
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