How to Determine Value of Coverage if HRA/Health FSA Reimburses Medical Insurance Premiums

[Guest S. Nofziger]

Question regarding the exclusion for “Health FSAs” for purposes of the exemption from the annual limit restrictions under the PPACA:

The interim final regulations governing the lifetime and annual limits under the PPACA include an exception for Health FSAs under IRC 106©(2). See Treas. Reg. 54.9815-2711T(a)(2)(ii). IRC 106©(2) defines a Health FSA as a benefit program under which specified medical expenses may be reimbursed and the maximum amount of reimbursement reasonably available to a participant is less than 500% (5x) the value of such coverage. While there is no clear IRS guidance on how to determine the “value” of coverage under an HRA/Health FSA, the “value” of coverage is generally presumed to be equal to the plan’s average per-participant reimbursement amount (i.e., the average claims cost per participant). For example, if an HRA has 10 participants, a maximum reimbursement of $2,000, and $4,500 in claims during the plan year, it is typically considered to be a Health FSA because the maximum reimbursement of $2,000 is less than 5x the presumed $450 per-participant claims cost—i.e., the “value” of coverage.

My question is this:

Does anyone have any guidance on how “value” of coverage may be affected if an HRA will reimburse the purchase of health insurance premiums (not just medical expenses)? Arguably, if health insurance premiums can be reimbursed, the “value” of the HRA coverage would be more than just the plan’s average per-participant reimbursement amount or even the plan’s maximum benefit amount, because participants can purchase insurance that will pay for larger amounts. Does anyone have guidance or thoughts on this?

Thanks!

Steve

[Clarifying Health]

It's my understandings that the value of an HRA will not be affected if it can reimburse health insurance premiums or not. The value will still be the amount available for reimbursement.

This article may help: Stand-alone HRAs Can Still Reimburse Health Insurance Premiums

[Chaz]

I would hesitate to rely on the above referenced article without speaking with counsel.

[GBurns]

Remember that just because you saw it on the internet does not mean that it is true.

As Chaz advises speak with competent counsel. Disregard the article. Health FSAs have nothing to do with HRAs.

A number of articles and alerts etc have been put out by many credible sources including many law firms. The meaning to be drawn from the unfortunate and unexplained reference to section 106 © (2) is agreed on by seemingly everyone except the publishers of that article, and who needs a definition to support its products. I suggest that as a first step you take a look at section 106 then go to 106© and read the section title then see 106©(2) which falls under 106©.

Then look up some of the many other readily available articles from many credible sources who have addressed the issue of "stand alone HRAs" and "integrated HRAs".