Immediate Improvements for High Deductible Health Plans (HDHPs), Health Savings Accounts (HSAs), and 2020 Changes for Health Reimbursement Arrangements (HRAs)

Effective Immediately, “preventive care” for HDHPs and HSAs includes expanded care for “chronic conditions”

Since 2003, individuals covered solely by a high deductible health plan (HDHP) have been able to make and receive pre-tax contributions to a Health Savings Account (HSA). The HSA funds can be used to pay medical expenses not covered by the HDHP, such as medical expenses incurred before meeting the deductible limit under the HDHP.

Under the applicable rules, “preventive care” medical services are not required to be subject to a deductible and can be paid by the HDHP before the covered individual meets the deductible.

The Department of Treasury issued guidance this month that significantly expands the definition of preventive care and is effective immediately. Preventive care now includes certain medical care services received and items purchased, including prescription drugs, that are intended to treat certain chronic conditions.

This new definition of preventive care may require amendments to the Plan documents and to the Plan’s Schedule of Benefits (SOBs) if the employer wishes to take advantage of these new rules. Employers with HDHPs should notify covered individuals of any changes made to the Plan in response to these new rules as soon as possible.

(Note: This change to the definition of “preventive care” for HDHP/HSA purposes does not impact the types of benefits that must be offered under a plan covered by the Affordable Care Act as a “preventive health service”.)

Please contact us if you would like us to assist with the interpretation/implementation of these new rules or with the drafting or review of the notice to covered individuals, the update of the SOBs, or the review and update of the Plan document and SPD.

Beginning in 2020, New Types of HRAs Can Be Offered

Regulators from the Departments of HHS, Labor, and Treasury recently issued guidance that, starting in 2020, allows employers to (among other things) offer health reimbursement arrangements (HRAs) to integrate with coverage obtained from the individual market without violating the Affordable Care Act. This is a reversal of the regulators’ long-standing position that integration with this type of individual coverage was not permitted.

The new rules allow an HRA to be integrated with various types of individual coverages, such as those obtained from the ACA Exchanges. For an HRA to be integrated with individual coverage, the HRA must be available (and no “traditional group health plan” can be offered) to all employees, or to all employees within a permitted class of employees (such as full-time, part-time, salaried, or non-salaried) and must be offered on the same terms to all members of that class of employees.

There are numerous, detailed technical requirements for sponsoring an HRA that is integrated with individual coverage, such as minimum class size, reasonable substantiation, opt-out, and notice requirements, all of which must be considered by an adopting employer. Also, to avoid the individual coverage itself being treated as an ERISA plan, an HRA sponsor cannot endorse any particular insurance coverage and the purchase of individual policies must be voluntary for employees.

In addition, the rules create “excepted benefits HRAs” which can be used to reimburse excepted benefits such as limited-scope vision or dental benefits, as well as certain types of other medical expenses. There are numerous, detailed technical requirements for these arrangements as well.

Employers wishing to implement an HRA for individual coverage or an excepted benefits HRA in 2020 should begin thinking about what class of employees may be appropriate and how such an arrangement might co-exist with current arrangements.

Please contact us if you would like to discuss these new HRA options.

Categories: Legal Update