HRAs

[Jacmo]

I'm currently in a debate with a cohort. I believe that an employer can do just about any thing they want to under an HRA as long as everyone is treated the same, no A/D tests are failed, the plan does not favor Key or HCEs, and the plan is in writing and communicated.

Example: HRA is effective 5/1 and states that it will pay 1,000 toward the 1,500 deductible of the Major Medical plan.

I say that the plan can allow credit for deductible expenses incurred back to 1/1 (as long as it's in writing, communicated, and meets requirements noted above).

My cohort says no. No expenses can be allowed prior to 5/1, the eff. date of the plan.

Who is right?

[Guest Ira Hayes]

Your cohort is in the lead. Namely, since the HRA is subject to COBRA, how would it be administered for a group health plan participant who left during the first four months of the deductible year?

[Guest taylorjeff]

I think you're essentially saying effective May 1 you have a $500 deductible. Assuming you leave the deductible accumulation period to be calender year, anyone who has already incurred at least $500 of deductible expense will have their deductible met for the year, from that point forward. You are giving credit for any deductible expense 1/1 to 5/1. However, you are only making claim payments for services incurred 5/1 and forward.

I'm currently in a debate with a cohort. I believe that an employer can do just about any thing they want to under an HRA as long as everyone is treated the same, no A/D tests are failed, the plan does not favor Key or HCEs, and the plan is in writing and communicated.

Example: HRA is effective 5/1 and states that it will pay 1,000 toward the 1,500 deductible of the Major Medical plan.

I say that the plan can allow credit for deductible expenses incurred back to 1/1 (as long as it's in writing, communicated, and meets requirements noted above).

My cohort says no. No expenses can be allowed prior to 5/1, the eff. date of the plan.

Who is right?

[Guest Guest99]

Thanks for your replies! Ira--if someone left during the first 4 months, they they would never have been covered under the HRA. But I don't know much about COBRA. Are you saying that as a COBRA participant under the companion base health plan, that person would have the right to participate in the HRA when it became available?

Thanks!

[Guest taylorjeff]

Ira hasn't chimed in so I'll take a stab.

If the plan offered 5/1 is the only option offered by the employer (ie. all the employees are now enrolled in the $1500 deductible base medical plan with the additional $1000 reimbursement thru the HRA), then that's what all COBRA participants will get. Again, they are not eligible for reimbursement of past claims, but will have the new lower deductible May 1 and (assuming the calendar year deductible accumulation) will receive "prior deductible credit" for deductible expenses incurred up to May 1.

Their COBRA cost is the base medical plan premium plus a reasonable estimate of the HRA cost apportioned on a per employee/dependent basis plus the 2% allowed for COBRA. The HRA administrator will often calculate the HRA COBRA rate based on estimated claims & admin expense.

Thanks for your replies! Ira--if someone left during the first 4 months, they they would never have been covered under the HRA. But I don't know much about COBRA. Are you saying that as a COBRA participant under the companion base health plan, that person would have the right to participate in the HRA when it became available?

Thanks!

[LRDG]

Your cohort may be thinking of constructive receipt concers, which I agree with.

I'd consider that in addition to the Cobra issue/s raised.