HRAs, MERPs, and FSAs under Obamacare

[Oh so SIMPLE]

Do the prohibitions on lifetime caps on benefits, and the phasing out of annual caps on benefits, of PPACA '10 apply to MERPs, HRAs, and FSAs?

All three limit benefits based on a dollar amount. For example, a MERP might limit the employer's reimbursement of medical expenses, for example, to $7,500 per year. Is that an annual limit that will now be prohibited under Obamacare, meaning that the employer's obligation to reimburse must now be unlimited?

[Oh so SIMPLE]

Anyone have any thoughts?

[Guest Leo the Lion]

See the Preamble to the Interim Final Rules published in Federal Register June 28, 2010 at page 37190-37191. It provides that the annual/lifetime dollar limit rule does not apply to FSAs, HSAs or MSAs nor to a ‘retiree-only’ HRA. The annual/lifetime dollar limit rule also does not apply to an HRA that is ‘integrated with other coverage as part of a group health plan’ where that other coverage, by itself, would not violate the rule against annual dollar maximums. Finally, the agencies requested comments from the public regarding the application of the annual/lifetime dollar limit rule to ‘stand-alone HRAs that are not retiree-only plans.’ I infer from that last piece that the government has not (yet) concluded that stand-alone HRAs for active employees will be subject to the rule against annual/lifetime dollar limits; stay tuned.

[leevena]

Leo is correct. I am somewhat concerned that the HSA model may not survive, but since the last election, it might stay. Just waiting for final.

[JCJD]

I realize the agencies have asked for comments on stand alone HRAs - has anyone heard of any forthcoming guidance? And, withouht any subsequent guidance, are any companies adding this kind of HRA now despite the possible issues?

[MARYMM]

Leo is correct. I am somewhat concerned that the HSA model may not survive, but since the last election, it might stay. Just waiting for final.

Just curious about why you think it may not survive.

I need to write to my congresscritters about the disconnect between HSA eligiblity rules for dependents and the new coverage rules for dependents under PPACA. We only offer HDHP/HSA here . I like it, it works for me. I 've contributed the max each year and take advantage of the investment options our provider offers. And I've been fortunate to have good health - knock wood.

But a single parent who covers their 24 year old kid gets bumped from a $1500 deductible to $3000 then can't use any of the money in their HSA to pay for the kid's expenses. That is a hardship for some employees.

[leevena]

As with any law/regulation, the devil is in the details and interpretation/implementation. The Healthcare Reform legislation did not do away with these plans. The most obivous impact is; 1) the loss of OTC drugs as a qualified expense, 2) increase of non-qualified withdrawls penalty from 10% to 20%, and 3) loss of hardship withdrawl.

What does concern me though is how HHS interprets and implements the provisions pertaining to actuarial value, MLR's, and essential benefits. The actuarial value (60% of costs to cover claims) is the one that worries me the most.

Hope this explains.