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A Guide to Health Reimbursement Plans

Compliance Requirements for a Health Reimbursement Plan

Health Reimbursement Plans (HRPs) are Section 105 group health plans. As such, they must comply with IRS rules, HIPAA, COBRA,  ERISA, and the Affordable Care Act (ACA). This section details these compliance requirements.Compliance_requirements_health_reimbursement_plan

IRS

  • Plan Documents: The IRS requires that written Plan Documents are established and maintained. Plan Documents define what expenses are eligible for reimbursement, the amount of employer contribution, and other required details about the reimbursement plan.

  • Documentation: The IRS requires that employees submit proper documentation verifying their claim for reimbursement, and that supporting documentation is saved on file for ten years.

  • Non-Discrimination: HRPs must comply with IRS nondiscrimination rules. The rules state the plan must not discriminate in favor of highly compensated individuals (HCIs) with respect to eligibility to participate in the plan or benefits provided under the plan.

HIPAA

  • HIPAA Privacy Rules: HRPs are governed by HIPAA Privacy Rules. In order to administer an HRP correctly, the entity processing employee reimbursement claims receives Protected Health Information (PHI) that is required to be held confidentially under HIPAA.

COBRA (Only for plans with 20 or more participants)

  • COBRA Compliance:  Employers must give terminated employees the option to continue their participation in the HRP for a period after termination, and may charge an employee up to 102% of the value of their allowance if COBRA is elected.

ERISA

  • Summary Plan Description: HRPs are employee welfare plans under ERISA. ERISA requires every [welfare] plan to have a Summary Plan Description (SPD) and to furnish copies to each participant.

  • ERISA Compliance: The U.S. federal government has specific regulations employers must comply with in order to reimburse employees for individual health insurance premiums without triggering ERISA plan status for the individual health insurance policies. For example, the employer must not endorse specific individual health insurance policies or pay directly for them.

Affordable Care Act (ACA)

  • Annual Limit Compliance: Section 2711 of the Public Health Services (“PHS”) Act, as added by the ACA, provides that no annual or lifetime limits may be placed on essential health benefits (“EHB”). PHS Act 2711 provides that annual limits and lifetime limits may be placed on benefits that are not EHB, such as health insurance premiums. As such, HRPs are designed to only reimburse individual health insurance premiums up to a specified monthly healthcare allowance, and basic preventive health services as required by PHS Act Section 2713 (discussed next).

  • Preventive Care Compliance: Section 2713 of the PHS Act, as added by the ACA, requires group health plans (including HRPs) to cover basic preventive health services without cost-sharing.

  • 90-Day Waiting Period Compliance: The ACA prohibits waiting periods over 90 days for eligible employees.

  • Internal and External Claims Appeal Process: The ACA added new requirements to the internal and external appeal process including how and when procedures are communicated to plan participants.

  • Dependent Coverage for Adult Children up to Age 26: Section 2714 of the PHS Act, as added by the ACA, provides that group health plans (including HRPs) that make available dependent coverage of children must make such coverage available for children until 26 years of age.

  • Uniform Explanation of Coverage and Definitions: The ACA requires that group health plans, participants, and beneficiaries receive a standardized summary of benefits and coverage (“SBC”) and a set of uniform definitions (“Uniform Glossary”), both of which must conform to requirements outlined in the ACA and existing regulations.

  • Form 720 Comparative Effectiveness Research (CER) Fee: The ACA includes a "research fee" that plan sponsors must pay on an annual basis annually via Form 720.

  • 60-Day Notice of Material Modification: The ACA requires employers to provide 60 days advanced notice to participants when making material modifications to their group health plan (including HRPs).

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