The Labor Department has postponed the March 1 deadline for notifying employees of their right to purchase health insurance on the Exchanges.  Frequently asked questions (“FAQs”) released by the Departments of Labor, Health and Human Services, and Treasury also provide guidance on Affordable Care Act requirements for health reimbursement accounts (“HRAs”), self-insured Employer Group Waiver Plans (“EGWPs”), and the payment of Patient Centered Outcomes Research Institute (“PCORI”) fees from plan assets. 

Deadline for Providing Exchange Notices Postponed to Late Summer or Fall of 2013

The Affordable Care Act requires employers to provide a written notice to employees by March 1, 2013, informing them of the existence of the Exchanges.  The notice must also explain that if an employee purchases coverage on an Exchange, the employee might be eligible for a premium tax credit and might lose a tax-free employer contribution for coverage offered by the employer.

The FAQs explain that the Labor Department will not require employers to provide the notice until the Labor Department issues regulations implementing the notice requirement.  The Labor Department expects to postpone the notice deadline until the late summer or fall of 2013 to coordinate with the open enrollment period for the Exchanges.

Regulations implementing the notice requirement might provide a model notice, or might allow employers to satisfy the requirement by combining the notice with a template that describes the employer’s health coverage.  The coverage template would include information about the employer’s group health plan that an Exchange could use to determine whether the employee is eligible for premium tax credits.  The Department of Health and Human Services has stated that it expects to release the template soon.

Health Reimbursement Arrangements Must Be Integrated with Employer Coverage

HRAs are account-based group health plans under which a fixed amount of employer contributions can be used by employees to pay for health insurance premiums and other medical expenses.  Because employees can receive reimbursements only up to the amount of their account balance in any given year, it is not clear how HRAs can comply with ACA’s restrictions on annual and lifetime dollar limits.

Some HRAs are not subject to ACA’s requirements because they meet existing exceptions, such as the retiree-only exception.  For non-exempt HRAs, the preamble to the interim final regulations implementing the prohibition on annual and lifetime limits provided that these HRAs could comply with ACA’s requirements if they were integrated with other group health coverage that complied.  The FAQs explain in greater detail what it means for an HRA to be integrated with other group health coverage.

The FAQs explain that an integrated HRA must be available only to employees who are actually enrolled in (and not merely offered) primary group health coverage provided by the employer.  An HRA will not be considered integrated if the employee uses it to purchase coverage on the individual insurance market.

The FAQs explain that future guidance will allow account balances accrued as of December 31, 2013, in non-compliant HRAs to continue to be used to reimburse medical expenses, as long as no additional amounts are credited to the HRAs after that date.  The amounts credited during 2013 must be determined under the terms of the HRA in effect on January 1, 2013.

Coverage Mandates Will Not Be Enforced Against EGWPs With Self-Insured Wrap Coverage

Employers may sponsor Medicare Part D prescription drug plans for Medicare-eligible retirees.  Because employers receive a waiver from CMS allowing them to limit enrollment to the employer’s own Medicare-eligible retirees, these Part D plans are called Employer Group Waiver Plans (or “EGWPs”).

Employers that sponsor EGWPs often provide supplemental or “wrap” coverage for non-Medicare drug benefits.  Supplemental coverage provided under a separate insurance policy is an “excepted benefit” that is not required to satisfy ERISA’s coverage mandates (including HIPAA portability, mental health parity, and other health coverage requirements as well as the ACA mandates); but this exception does not apply to self-insured wrap coverage.  The FAQs announce that the agencies will not enforce the health coverage mandates with respect to supplemental coverage provided under self-insured EGWPs, pending further guidance.

Fixed Indemnity Coverage Does Not Include Per-Service Payments

Fixed indemnity coverage is an “excepted benefit” that is not required to comply with the health coverage mandates.  In order to qualify for this exception, the insurance must pay a fixed dollar amount per day or other period (for example, $100 per day of hospitalization), regardless of expenses actually incurred.

The FAQs explain that fixed payments per service do not meet this requirement.  For example, coverage providing payments of $50 per office visit or $15 per prescription will not qualify as fixed indemnity coverage.

Multiemployer Plans May Pay PCORI Fees From Plan Assets

The Department of Treasury recently issued final regulations implementing the fees imposed on plans sponsors of self-insured health plans to fund the Patient-Centered Outcomes Research Institute (generally $1 or $2 times the average number of covered lives).  In the preamble to the final regulations, the Department of Treasury noted that the Department of Labor had advised that because the fee is imposed on plan sponsors, it generally may not be paid from plan assets.

The FAQs confirm that plan sponsors must pay PCORI fees from their own assets and not from plan assets in most cases.  The FAQs create an exception for multiemployer plans, however, since these plans generally have no source of funding other than plan assets that they can use to pay the fee.

The FAQs also note that a similar exception might exist for certain VEBAs, such as VEBAs established to “buy out” retiree health liabilities.  Like multiemployer plans, these VEBAs are sponsored by a trustee or board of trustees and have no source of funding independent of plan assets.  In contrast, however, a VEBA sponsored by an employer or group of employers ordinarily would not be able to pay the PCORI fees, since the sponsoring employers exist for reasons other than solely to administer the VEBA and can pay the fees out of their own assets.