The tax team at LSL CPAs addresses some of the challenging questions about Health Reimbursement Arrangements (HRA’s) and Employee Payment Plans (EPP’s) under the Affordable Care Act. Are they still allowed?
The only way an HRA or EPP is permissible under the new rules is if it is integrated into a group health plan sponsored by the employer. There are two integration methods. The first applies to plans that do not meet the minimum value requirement. The second applies to plans that do meet the minimum value requirement.
Minimum Value Plans
For a plan to have minimum value, it must cover at least 60% of the costs of benefits provided. Plans under this integration method are only permitted to reimburse certain expenditures. For a plan to have minimum value, the employer must offer a group health plan to the employee that does consists of more than just excepted benefits. An HRA is limited to reimbursement of one or more of the following – co-payments, co-insurance, deductibles, and premiums under the non-HRA group coverage. An HRA must reimburse medical care that falls under any of the essential health benefits.
The definition of these benefits under ACA is comprehensive. Essential health benefits include:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services including oral and vision care.
Meeting The Minimum Value
The second integration plan applies to plans that do meet the minimum value requirement. Such plans include the following:
- The employer offers a group health plan to the employee that provides minimum value.
- The employee receiving an HRA is actually enrolled in a group health plan that provides minimum value.
- An HRA is available to employees enrolled in a group health plan that provides minimum value.
The tax team at LSL CPAs is here to offer the support you need. To learn more, please contact LSL CPAs by calling at (714) 569-1000.
By Jon Huckabay, CPA
