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HRAs & Annual Limit Restrictions - August 24, 2011

Health reimbursement arrangements ("HRAs") in effect prior to September 23, 2010 no longer need to apply to HHS for a waiver of the annual limit restrictions in the Affordable Care Act. Under the Act, group health plans, including HRAs, are subject to annual limit restrictions on essential health benefits until 2014. Beginning in 2014, annual limits on essential health benefits are prohibited. In previous guidance, HHS clarified that an HRA integrated with an underlying medical plan (for example, an HRA subsidizing deductibles or out of pocket maximums imposed by an employer's major medical plan) complies with the annual limit restrictions if the underlying medical plan complies.  However, stand-alone HRAs (for example, HRAs that reimburse employees directly for insurance premiums or medical expenses) were not addressed and presumably have to comply with the annual limit restrictions.  Until 2014, HHS has allowed plans who by their nature cannot comply with the annual limit restrictions (mini-med plans, HRAs, etc.) to apply for an annual waiver of the restrictions provided the plan was in place prior to September 23, 2010.   


In guidance released on Friday, HHS exempts HRAs 8-24-11from the waiver application process, recognizing that by their nature HRAs  have annual limit restrictions far below those required by the Act. In light of this guidance, stand-alone HRAs no longer need to apply for an annual waiver to be exempt from the annual limit restrictions provided the stand-alone HRA was in effect prior to September 23, 2010. The new exemption applies only until 2014 at which time the waiver program will end.  HHS will need to issue further guidance on how HRAs will be treated in 2014 when annual limits are no longer allowed on essential health benefits.