HRA – Annual Limits

Under the PPACA, plans and insurers cannot impose annual dollar limits on “essential health benefits” beginning on or after January 1, 2014.  However, the PPACA allows for "restricted annual limits" for plan years before January 1, 2014.  The proposed regulations issued by the Departments provided that these annual limit requirements would not apply to health flexible spending arrangements or health savings accounts.  In addition, a health reimbursement arrangement ("HRA") that is "integrated" with a group health plan is not subject to the annual limit as long as the group health plan complies with the limits.  The Departments requested comments on how the annual limits would apply to stand alone HRAs that are subject to the PPACA.1

The Departments also implemented a "waiver" program whereby a group health plan could request a waiver from the annual limit requirements during the period before January 1, 2014.  Additional guidance was issued by the Departments on August 19, 2011, which provided that stand-alone HRAs in existence as of September 22, 2010 are exempt from having to apply for a waiver and in fact are exempt from the annual limit requirements as a class (for plan years beginning on or after September 23, 2010 but before January 1, 2014).   However, HRAs exempt from the annual limit requirements must still comply with certain record retention and annual notice requirements.  Model language and instructions on this notice requirement can be found here.

It is not clear whether or not stand-alone HRAs that are subject to the PPACA will be required to comply with the annual limits after January 1, 2014.  If so, the PPACA will prohibit most stand-alone HRAs.  We are expecting further guidance on this issue.

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1 The PPACA does not apply to certain "expected" benefits, which would include some HRAs.

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