A frequently asked question we receive at Zane Benefits is "Are HRAs Required to Cover Essential Health Benefits?" The answer is No! Here's why:
An HRA is a Self-Insured Group Health Plan
An HRA, or Health Reimbursement Arrangement, is a self-insured group health plan under which an employer makes available a specified maximum dollar amount to employees for the reimbursement of medical expenses and/or health insurance premiums.
Assuming certain IRS rules are met, reimbursements are excludable from employees gross income under Sections 105 and 106 of the Internal Revenue Code.
Self-Insured Group Health Plans Are Not Required to Cover Essential Health Benefits
As outlined in the essential health benefits bulletin, self-insured group health plans are not required to cover the essential health benefits. Here's an excerpt from a HHS FAQ on this topic.
#10. How would the intended EHB policy affect self-insured group health plans, grandfathered group health plans, and the large group market health plans? How would employers sponsoring such plans determine which benefits are EHB when they offer coverage to employees residing in more than one State?
A: Under the Affordable Care Act, self-insured group health plans, large groupmarket health plans, and grandfathered health plans are not required to offer EHB. However, the prohibition in PHS Act section 2711 on imposing annual and lifetime dollar limits on EHB does apply to self-insured group health plans, large group market health plans, and grandfathered group market health plans. These plans are permitted to impose non-dollar limits, consistent with other guidance, on EHB as long as they comply with other applicable statutory provisions. In addition, these plans can continue to impose annual and lifetime dollar limits on benefits that do not fall within the definition of EHB.
To determine which benefits are EHB for purposes of complying with PHS Act section 2711, the Departments of Labor, Treasury, and HHS will consider a self-insured group health plan, a large group market health plan, or a grandfathered group health plan to have used a permissible definition of EHB under section 1302(b) of the Affordable Care Act if the definition is one that is authorized by the Secretary of HHS (including any available benchmark option, supplemented as needed to ensure coverage of all ten statutory categories). Furthermore, the Departments intend to use their enforcement discretion and work with those plans that make a good faith effort to apply an authorized definition of EHB to ensure there are no annual or lifetime dollar limits on EHB.
Since HRAs Are Self-Insured Group Health Plans, HRAs Are Not Required to Cover Essential Health Benefits
Let's Repeat... As HRAs are self-insured group health plans, they are not required to cover essential health benefits.
What Does This Mean for Stand-alone HRAs and Premium Reimbursement?
It means that Stand-alone HRAs can be established to exclude all essential health benefits and only reimburse non-essential health benefits. (e.g. health insurance premium expenses and dental).
Additional Information on Essential Health Benefits
- Essential Health Benefits Proposed Rule from the Department of Health and Human Services, Nov. 20, 2012
- Frequently Asked Questions on Essential Health Benefits Bulletin from the Department of Health and Human Services, Feb. 20, 2012
- Essential Health Benefits Bulletin from the Department of Health and Human Services, Dec. 16, 2011