New ACA FAQs – Special Enrollment, Women’s Preventive Care and a Cure for the HRA that Ails You (If You’re Small Enough)
December 28, 2016
Authored by: Katharine Finley and Chris Rylands
In the latest round of FAQs on ACA implementation (now up to 35 if you’re keeping track), the DOL, HHS and Treasury Department addressed questions regarding HIPAA special enrollment rights, ACA coverage for preventive services, and HRA-like arrangements under the 21st Century Cures Act.
Special Enrollment for Group Health Plans. Under HIPAA, group health plans generally must allow current employees and dependents to enroll in the group health plan if the employee or dependents lose eligibility for coverage in which they were previously enrolled. This FAQ clarifies that an individual is entitled to a special enrollment period if they lose individual market coverage. This could happen, for example, if an insurer covering the employee or dependent stops offering that individual market coverage. However, a loss of coverage due to a failure to timely pay premiums or for cause will not give the employee or dependent in a special enrollment right.
Women’s Care: Coverage for Preventive Services. The Public Health Service Act (PHS Act) requires non-grandfathered plans to provide recommended preventive services without imposing any cost-sharing. Recommended preventive services that must be covered include the women’s preventive services provided for in Health Resources and Services Administration’s (HRSA) guidelines.
HRSA updated its guidelines on December 20, 2016. The updated guidelines build on many of the existing preventive care for women and include screening for breast cancer, cervical cancer, gestational diabetes, HIV, and domestic violence, among other items. The services identified in the updated guidelines must be covered, without cost-sharing, for plan years beginning on or after December 20, 2017. For calendar year plans, that’s the plan year starting January 1, 2018. Until those guidelines become applicable, non-grandfathered plans are required to continue providing coverage without cost-sharing consistent with the previous HRSA guidelines and the PHS Act.
Qualified Small Employer Health Reimbursement Arrangements. Since 2013, the DOL, IRS and HHS published guidance (here, here and here) addressing the application of the ACA to HRAs. This guidance explained that HRAs and similar arrangements that are used to pay or reimburse for the cost of individual market policies will fail to comply with the ACA because the arrangements, by definition, reimburse or pay medical expenses only up to a specified dollar amount each year and would not meet other ACA requirements. Prior to this guidance, smaller employers would sometimes reimburse employees for individual policies instead of obtaining their own group policy. This guidance made such a practice impermissible and could subject employers to penalty taxes of $100 per day per individual for violations.
To address concerns raised by application of the ACA reforms to certain arrangements of small employers, the 21st Century Cures Act created a new type of tax-preferred arrangement, the “qualified small employer health reimbursement arrangement” (QSEHRA) to reimburse for medical expenses, including coverage on the individual market. This special arrangement is effective for plan years beginning after December 31, 2016. For calendar plan years, this means the QSEHRA exclusion is effective January 1, 2017. For plan years beginning on or prior to December 31, 2016, the relief under Notice 2015-17 applies (which we discussed in a previous post).
To be a QSEHRA under the Cures Act, the arrangement generally must:
- Be funded entirely by an eligible employer (generally, an employer that had fewer than 50 full-time equivalent employees in the prior year and does not offer a group health plan to any of its employees);
- Provide for payment to, or reimbursement of, an eligible employee for expenses for medical care as defined in Code section 213(d);
- Not reimburse more than $4,950 ($10,000 for families) of eligible expenses for any year; and
- Be provided on the same terms to all eligible employees of the employer.
While a QSEHRA is not a group health plan for ACA or COB RA purposes, the 21st Century Cares Act does not really address how (or whether) other ERISA rules apply to QSEHRAs. Additional guidance in these areas would be helpful.