Are You Really Saving Money By Self Administering Your HRA?
Do you think you’re saving money by administering your health reimbursement arrangement (HRA)? In our experience, many employers that self-administer an HRA often overlook important compliance obligations that put them at financial risk. Failure to comply with the following requirements is common and can be costly.
An HRA is a group health plan subject to COBRA. Employees that experience a qualifying event are entitled to continue coverage under the employer’s HRA. An employer that fails to extend COBRA coverage to HRA participants can be subject to substantial fines. Employers can be fined up to $110 per day for failure to provide an initial notice or election notice.
An HRA is a self-funded health plan and governed by the HIPAA Privacy Rules. Employers that offer a fully-insured health plan and sponsor an HRA often overlook their HIPAA Privacy obligations. In order to administer an HRA, the entity processing the claims receives protected health information (PHI) which is protected by HIPAA. Employers that offer a fully-insured health plan will rely on the insurance carrier to comply with the HIPAA Privacy Rules. However, the HRA compliance obligations rest with the employer. Employers that do not comply can be subject to civil penalties of up to $100 per violation.
An HRA is a group health plan subject to Medicare Secondary Payer (MSP) provisions. New reporting requirements went into effect in the fourth quarter of 2010. Employers are required to provide HRA coverage information to the Centers for Medicare and Medicaid Services (CMS). The information reported to CMS will allow better coordination of payer responsibilities between the group health plan and Medicare. Failure to comply could result in fines of up to $1,000 per day.
An HRA is an employee welfare plan under ERISA. ERISA requires that every warfare plan be established and maintained pursuant to a written instrument. The written instrument or plan document serves to define what expenses are eligible for reimbursement, the amount of employer contribution, and whether the funds may be rolled over from year to year. Not only could an enforcement action be brought against an employer for failure to have a plan document, but it is difficult for the employer to prove plan terms and enforce its provisions.