ACA Changes to HRA plans: HRA Opt-Out Option Plan Amendment

Attached please find the HRA Opt-Out Option Amendment and SMM (summary of material modifications) for your HRA plan documents. This amendment is for your company’s document and the SMM is for the summary plan description for your employees. These are not documents that we need to have returned to us at HRCTS but only for your records.

The purpose of this Amendment is to adopt the opt-out option under a Health Reimbursement Arrangement (HRA) Plan allowing employees and former employees the opportunity to permanently opt out of and waive future reimbursements from the HRA at least annually. Upon termination of employment, the HRA must either be forfeited, or it must allow the employee to permanently opt out of and waive future reimbursements.

HRCTS will include this in any HRA document that we prepare for you in the future.  If you would like more information on the HRA Opt-Out Amendment please review the following IRS publication here and contact our sales team.

New Proposed Regulations for HRA Plans

New Proposed Regulations for HRA Plans

Recently the United States Departments of Labor, Health and Human Services and the Treasury announced important regulatory FAQs about the implementation of various provisions of the Patient Protection and Affordable Care Act (PPACA), including clarification regarding the use of HRAs to purchase coverage on the individual market. The most important of these FAQs states that federal regulations will be issued that prohibit use of so-called standalone HRAs for the purpose of funding payment of premiums for individual insurance policies.
In response to this guidance HR Concepts is in the process of implementing the plans and technology to support both HRA-based and Cafeteria Plan-based Defined Contribution models. HR Concepts is working diligently to offer a compliant defined contribution solution for our clients and participants.  We will provide additional updates in the coming months as it relates to these new plan offerings.

Medicare Secondary Payer Mandatory Reporting

CMS Section 111 Mandatory Reporting

Section 111 of the Medicare, Medicaid and SCHIP Extension Act of 2007 (MMSEA), added mandatory reporting requirements for certain insurers, self-insured entities, and third party administrators that will enable the Center for Medicare and Medicaid Services (CMS) to determine when the Medicare program does not have primary payment responsibility for expenses that are able to be reimbursed by Medicare. To comply with Section 111 reporting, HR Concepts has been tracking in greater detail the data necessary for these reporting requirements. The CMS Section 111 rules apply to different types of plans such as Healthcare Reimbursement Arrangements which would identify HR Concepts as a "Responsible Reporting Entity" or RRE.  Since HR Concepts is administering the HRA plan for a number of our clients we have been taking steps to ensure that we have the most current Medicare related information available to CMS.  Section 111 reporting is required for HRA plans that cover medical benefits though there are exceptions to this which include the following:

HRA plans that only cover dental or vision services. HRA plans where the employer funding is less than $1,000. HRA plans that are provided to a retiree or any individual where Medicare coverage is primary to the employer's health plan.
No reporting is required for Flexible Spending Accounts or Health Savings Accounts.

Any employer group who subscribes to an HRA plan with employer funding of at least $1,000 will need to be included with this reporting. This includes employees or dependents aged 45 and older who are enrolled in an HRA. It also includes covered individuals who have been receiving kidney dialysis or who have received a kidney transplant. In order for our systems to be able to identify potential Medicare claimants and to have the most accurate data, we may be requesting additional or updated information in the following areas:

Employee Information:

  • Age
  • Current Medicare beneficiary (yes/no)
  • Medicare ID (HICN)
  • Dependents
  • Current Medicare beneficiary (yes/no)
  • Age
  • SSN
  • Medicare ID (HICN)

Employer Information:

  • Employer size (total # of employees)
  • Plan sponsor name
  • TIN
  • Corporate Address

If HRC is currently administering your HRA plan and you are offering a minimum of $1000 in employer funding our client relations teams will be reaching out to you in the coming weeks to update these data elements.  The initial reporting period designated by CMS will be October 1, 2010 for HRAs with plan years beginning October 1. The first reporting period for HRA plans with a calendar year plan year will be January 1, 2011 to March 31, 2011. We hope you appreciate HR Concepts ongoing efforts towards maintaining our compliance with federal regulations and apologize for any inconvenience this process may incur on your behalf.


Healthcare Reimbursement Arrangements (HRA) and COBRA

What is an HRA?
A Healthcare Reimbursement Arrangement (HRA) is a self insured health plan sponsored by an employer for the purpose of reimbursing an employee for certain out of pocket expenses associated with being enrolled in the group health plan. With the ever increasing premiums for healthcare coverage, employers are finding it necessary to offer a high deductible health plan to reduce their premium cost. Employers then offer to reimburse some or all of the deductible/co-pays associated with the high deductible health plan that a participant will incur. The HRA allows the employer to reimburse the employee for the covered expenses as outlined by the HRA legal document. Because an HRA is considered a self insured health plan, it is subject to the COBRA laws and regulations.

Because the HRA is a company sponsored health plan, it is subject to COBRA. Under COBRA, employees have the right to elect to maintain their enrollment in the HRA. By electing to have their HRA while covered under COBRA, employees are able to submit their claims against the account for reimbursement. The real questions is not are employees allowed to have the account, but rather who is going to pay for the HRA expenses?

There are two schools of thought regarding who should be funding the HRA while it covers someone on COBRA. Most employers do not charge any premium assessment to the participant on COBRA because of the belief that no premium is being charged for regular employees who are enrolled on the HRA while employed. However, employers do have the right to charge a premium plus 2% to any COBRA participant who elects to have their HRA while on COBRA. To calculate the premium amount, several different methods have been developed; however, no specific guidance has been given by the government. The following methods appear to be the most popular:

If it is the first year of the HRA offering, an actuarially method must be used. Some guidance suggest taking the actual maximum claims that could be paid for each category of coverage (single, 2-person, family) and simply calculate this amount by 75%, add 2% for COBRA administration, and divide by 12 months to get a monthly premium per category.

Second year method might use an actuarially method or "past-cost" basis whereby a plan sponsor takes the past claims for the previous year per each category of coverage (single, 2-person, family) and adds the claims up, divide by the amount of covered participants per category, add 2% for COBRA administration, and divide by 12 to get the monthly premium per category.

All of the above rates would be calculated each year and rolled out to the COBRA participants. Regardless of which method is used, the entire balance of the annual election could be used from day one of the plan year by the COBRA participant.

HR Concepts strives to keep you updated in the regulations and changes that affect all your qualified plans. However, HR Concepts can never provide legal or tax advice. This outline is for discussion purposes only and should not be construed as legal advice or guidance. Any questions regarding COBRA laws and HRA's, an employer is directed to seek their own independent counsel.

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