Affordable Care Act Loser #7 – Health Reimbursement Account

Last week my boss informed me that our Health Reimbursement Account(HRA) would be phased out at the end of 2014 and he said that the most recent interpretation of Affordable Care Act by the Department of Labor had effectively outlawed the HRA. He and our HRA administrator discussed the options and do not have a clue what they were going to replace it with in December 2014.  As of right now we do not have a company supported health care plan for 2015. Our present plan is a stand-alone health reimbursement arrangement in which I am reimbursed for paying my health insurance premium. It is a very simple, portable health care plan that worked really well before the Affordable Care Act. Since the company is small enough to be exempt from most of the Affordable Care Act I was hopeful that I could continue the HRA in the future. It is truly ironic that the people who voted for the Affordable Care Act seem to be the last people to figure out that they have condemned some of us to health care hell. Abandon hope all ye who enter here.

The sad part is that the demise of the HRA did not have to happen this way. As an example the Public Health Services (PHS) Act Section 2711 requires a health insurance issuer to not establish lifetime limits on the dollar value of benefits for any participant or beneficiary. I can see how this requirement should be applied to my insurance company, Aetna, so I am not surprised that my insurance company has already complied. This was one of the positive contributions of the Affordable Care Act that had bipartisan support. I do not understand why our bureaucrats are applying this restriction to a HRA used to purchase a health insurance policy that complies with the requirement.  The Department of Labor has grudging accepted that a flexible spending plan can be used to pay health insurance premiums if it provides preventative care as required by PHS Act Section 2713 at 100% without cost-sharing, too. Huh? Since my insurance plan already complies with both of these requirements, isn’t this redundant? Zane Benefits thinks that a new plan they call a limited Healthcare Reimbursement Plan (HRP) can be constructed to comply with the Department of Labor requirements. All of this sounds so iffy I have to ask the question why did the Department of Labor decide to screw with health insurance that was working?  It sure looks like it is deliberate malfeasance. Here are two alternatives my company is probably looking at for 2015.

  1. In an effort to avoid unnecessary employee turnover they might opt to give everyone a $5,000 raise and tell us to get our health insurance from the exchange. $5,000 was the amount they contributed to the HRA last year.
  2. As a company with less than 50 employees it is not obligated to provide me with health insurance. They might opt to drop the HRA with no change in employee compensation.

In this strange as hell health care world the “raise” option is actually less attractive because the subsidy is greater than what the raise provides after you take out the taxes. A raise will likely push my income above the 400% FPL so I will not receive a subsidy. Since I do not qualify for a subsidy and my monthly premiums will go from about $407 to over $886 per month(2014 rates) for the lowest cost bronze plan, my out of pocket costs will zoom from zero to about $6,000 a year even when I account for the raise. The second option qualifies me for a subsidy and my total out of pocket costs is just $4,800. In 2015 I have the option to pay an additional $6,000 or $4,800 for heath insurance I paid zero for in 2013. Either way I lose. The only way to minimize my loses is if I can keep the HRA just the way it was.

So for a person who went without health insurance from 1998 to 2008 it looks like there is a very good chance that my wife and I will roll the dice and go without health insurance in 2015. Until the Affordable Care Act was passed we were part of the solution. We had health insurance and we were healthy. In fact we were the perfect health insurance customer. We never made a claim.  Now we are part of the problem in this strange, strange health care hell.

  • Wallace

    I am considering the limited Healthcare
    Reimbursement Plan but have some serious reservations. Zane is the only
    provider I’ve found that is offering this option. Do you agree with Zane’s stance?

  • Bill Huber

    I think a Defined Contribution Health Plan (DCP) and its predecessor, Health Reimbursement Account, are good options for many people and small businesses. Defined contribution plans allow businesses back to focusing on their business. The HRA was a very good plan for me and I would likely participate in the exchange if my company offered a DCP in 2015. The big question is whether a DCP that pays health insurance premiums is legal. Zane says the DCP model has been approved by the IRS. At this time my boss and the HRA plan administrator say no. I would like them to say yes but I respect that they are forced into a wait and see position in 2014. Obviously we are going to need the IRS bless some DCPs before my boss and the HRA administrator will follow. When they say yes, I will agree with Zane.

  • Tom

    I found this article today that is discouraging to most small business employers that want to do the right thing by their employees.

    http://www.theihcc.com/en/communities/policy_legislation/guidelines-for-using-reimbursement-arrangements-un_hua4t5gc.html

  • Bill Huber

    Thanks for the link. Yea, Mr. Condeluci’s analysis is pretty discouraging but I cannot find a date for his article. Most of his references are for 2013 and it was my understanding that a HRA replacement was under active discussion at the end of 2013 and the HRP was the end result. Zane’s HRP article was written in February of 2014. My problem is that my health insurance plan is grandfathered and may not be eligible for a HRP.

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  • George V. Kelly

    Interesting exchange between Treasury Sec Lew and Congressman Boustanty – indicates that Treasury guidance may not reflect the intent of Congress: http://www.c-span.org/video/?c4528896/boustany-questions-treasury

  • Thanks for the link. For those people who are still researching HRAs as a cost effective choice for small businesses, the link is a good snapshot of who is affected and why it is important to restore HRAs.

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