Standalone HRAs are out, as expected

Standalone HRAs will soon be a thing of the past. The Employee Benefits Security Administration, a division of the U.S. Department of Labor, provided a clarification on health reimbursement accounts late last week, ruling in a statement that HRAs are group health plans and therefore cannot have annual limits. The decision finalizes previous guidance that indicated government agencies would view HRAs in this way in compliance with the Affordable Care Act.

“I think people had suspected that standalone HRAs would not be viable after 2014,” says Linda Rowings, chief compliance officer for United Benefit Advisors, a group of independent brokerages throughout the U.S. “I think it’s very clear from this guidance that you can’t do standalone HRAs unless it’s for retirees or as a non-medical sort of benefit like dental or vision.”

The EBSA statement says, “a group health plan (or a health insurance issuer offering group health insurance coverage) may not establish any annual limit on the dollar amount of benefits for any individual.” In other words, because standalone HRAs would inevitably place a dollar amount on benefits, they will be tricky for any broker or plan to execute.

“Bottom line on this is that if you were hoping to use an HRA as a primary funding vehicle, that will be extraordinarily difficult, if not impossible, going forward,” Rowings says. But again, she adds, most brokers were anticipating this sort of ruling.

Anne Petry, insurance broker and consultant at Jaggi Insurance & Investments in Central Illinois, says while she thinks it’s a possibility that some employers were looking at standalone HRAs for employees to use on public or private exchanges, she hasn’t had any clients ask for it and didn’t think to recommend it herself. “I agree with the DOL's ruling,” she says. “Since an HRA is only funded by the employer, it is a type of health ‘plan’ (reimbursement) that is being offered. That employer is receiving a tax advantage in funding it, and the employee is essentially receiving pre-tax money to use.” She adds that she doesn’t know any of her broker peers who were still recommending standalone HRAs either and that the whole thing will eliminate the possibility of “double dipping” that could occur.   

HRAs that supplement group health plans, as they are commonly used with high deductible plans or to provide non-medical benefits like dental and vision, are viable under the ruling.