In an effort to dodge some of the rules and challenges that are part of Health Care Reform, some “slick” sales organizations are encouraging Colorado employers to just “get out the health insurance game” and offer a Health Reimbursement Arrangement (HRA) instead. Here is one of the marketing e-mails that we just received.
Their pitch sounds appealing — just set up a fixed dollar benefit for employees and then let employees pick their own individual health insurance policy. They say that the employer can still deduct this contribution as a business expense, and the benefit is also tax free to the employee. Sounds great, huh? But, there are a couple problems with this approach:
1. Currently, and for the remainder of 2013, individual health insurance plans are still medically underwritten. This means that there is no guarantee that your employees and/or their families will qualify for an individual health insurance plan. In fact, some employees may find out that they are uninsurable. Ouch.
2. Even though this “pitch” claims that by setting up an HRA, the employer is “getting out of the insurance business”. That is not just misleading…it is dead wrong! By setting up an HRA and paying individual health insurance premiums through the HRA, the employer is actually jumping even deeper into the health insurance business. Why? Because HRAs ARE HEALTH PLANS and THEY ARE SUBJECT TO THE SAME RULES AND REGULATIONS AS ANY OTHER HEALTH PLAN OFFERED IN THE STATE OF COLORADO. Specifically:
- HRAs would be subject to the part of the health care reform law that prohibits group health plans from establishing “lifetime limits on the dollar value of benefits for any participant or beneficiary” (PHSA §2711(a)(1)(A)). HRAs are account-based benefits which by their very nature impose upper limits on the dollar value of benefits. HRAs are in direct conflict with this part of the law.
- HRAs would be subject to HIPAA portability, privacy & security requirements.
- HRAs would be subject to ERISA requirements for disclosure, claims and fiduciary liability.
- HRAs would be subject to Federal benefit mandates including the Family and Medical Leave Act, Mental Health Parity and Addiction Equity Act of 2008, Women’s Health and Cancer Rights Act of 1998, and the New Borns’ and Mothers’ Health Protection Act.
- HRAs would be subject to Colorado mandated benefits as well. There are a slew of these, so I will spare you the details, but here is a Summary of Colorado’s Mandated Health Insurance Benefits.