New HRA regulations allow more businesses to provide much-needed health benefits to employees

Written by: Caitlin Bronson
Oct 25, 2018 10:00:00 AM

SALT LAKE CITY, UT – October 25, 2018  Proposed regulations from the Departments of the Treasury, Labor, and Health and Human Services to expand health reimbursement arrangements (HRAs) are a significant development in the larger personalized health benefits movement, according to PeopleKeep, the leading provider of personalized benefits automation solutions to small businesses.

Among other things, the regulations would allow all businesses to reimburse employees for health insurance purchased on the individual market through an HRA. This provides relief from a 2013 IRS interpretation of the ACA that seriously limited businesses’ ability to fund their employees’ healthcare tax-free.

It’s the latest advancement for HRA expansion, following the 2016 creation of the qualified small employer HRA (QSEHRA) and the subsequent adoption of QSEHRA automation solutions. It’s also a leap forward for personalized benefits—a framework in which companies give employees tax-advantaged money to buy what fits their personal needs, rather than forcing small businesses to deal with the hassle and cost of choosing a one-size-fits-all policy for employees.

“We commend the Departments’ willingness to reexamine prior rulings, and for moving the concept of personalized benefits forward,” said PeopleKeep CTO Chris Hansen. “The proposed rules bring us much closer to making personalized benefits available to all Americans and helping to address the number one issue facing our country today—affordable healthcare.”

Specifically, the regulations offer four major accomplishments for personalized benefits:

  • They expand availability of personalized benefits to businesses of all sizes. Although the QSEHRA is an effective and important vehicle for personalized benefits, it’s currently limited to businesses with fewer than 50 full-time employees. By expanding personalized benefits, the Departments expect to reach more than 800,000 additional businesses and 10 million employees.
  • They remove caps on employer contribution. Under the new regulations, businesses could give employees as much or as little as they’d like to put toward health care costs, removing a limitation that is impacting many businesses currently using a QSEHRA.
  • They create a special enrollment period for certain personalized benefits. Individuals who gain eligibility for the QSEHRA or the new individual-integrated HRA will have access to a special enrollment period during which they can purchase coverage. Previously, individuals with a QSEHRA had to wait for open enrollment or a qualifying life event to get coverage.
  • They expand businesses’ ability to leverage benefits as they compete for talent. As the job market grows more competitive, businesses need greater benefits flexibility to hire and keep talented employees. By allowing businesses to make distinctions between various employee classes, the regulations support businesses in that goal.

PeopleKeep, which gave the Departments valuable input in crafting the proposals, plans to continue its involvement in the process.

“The small businesses we work with every day are competing with larger employers for the same talent,” Hansen said. “The proposed rules increase the availability of HRAs, but with some improvements, they could be a more powerful tool for hiring and retention.”

PeopleKeep will work with the Departments to advocate including the following in the final regulations:

  • The ability to vary benefits offerings by job-based criteria, such as employee role. Currently, permitted employee classes include broad groups such as full-time employees, part-time employees, and employees in a waiting period. Expanding classes to include job-based criteria would give businesses more freedom to maximize the benefit for hiring and keeping key employees.
  • The ability to reimburse employees and dependents covered by a spouse’s group policy using the new individual-integrated HRA. In its current form, the regulations would allow only individuals covered by an individual health insurance policy to participate in the HRA and receive reimbursements.
  • An earlier implementation of the regulations. The regulations would allow the use of the individual-integrated HRA for plan years starting on or after January 1, 2020.  Moving up that date would allow businesses to start offering personalized benefits sooner as they face mounting pressure in the job market.

Regardless of the details of the final rules, expansion of HRAs will allow more businesses to provide much-needed health benefits to employees.

For more detailed information on the Departments’ proposals, click here.

Caitlin Bronson

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