Departments Issue Proposed Rule Expanding Health Reimbursement Arrangements (HRAs); Comments Due December 28

​The Departments of Labor, Treasury and Health & Human Services jointly issued a proposed rule that would permit HRAs to reimburse employees for the cost of individual health insurance coverage, subject to certain conditions. These conditions mitigate the risk that health-based discrimination could increase adverse selection in the individual market, and include a disclosure provision to ensure employees understand the benefit.

In addition, the proposed rule would:
  • Allow employers offering traditional employer-sponsored coverage to offer an HRA of up to $1,800 per year (indexed annually for inflation) to reimburse an employee for certain qualified medical expenses, including standalone dental benefits and premiums for short-term, limited-duration insurance plans.
  • Extend the tax advantage for traditional employer group insurance (exclusion of premiums, and benefits received, from federal income and payroll taxes) to HRA reimbursements of individual market insurance premiums. 
  • Provide plan sponsors with assurance that the individual health insurance coverage the premiums of which are reimbursed by an HRA or a qualified small employer health reimbursement arrangement (QSEHRA) does not become part of an ERISA plan, provided certain conditions are met
  • Provide a special enrollment period in the individual market for individuals who gain access to an HRA integrated with individual health insurance coverage or who are provided a QSEHRA. 

Comments are due December 28, 2018.

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