Each year employers must provide a written notice to Medicare-eligible employees who are covered under their group health plan. The notice must include information about the creditable coverage status of the prescription drug benefit. In other words, the notice tells employees if the prescription drug benefit on the group health plan is at least as good as the standard Medicare Part D plan.

Anyone who is eligible for Medicare but delays enrollment in a Part D plan is subject to a late enrollment penalty unless they have creditable coverage elsewhere. The late enrollment penalty is 1% of the base beneficiary premium for every full month a Medicare-eligible person is without creditable coverage and forgoes enrollment in Part D. The base beneficiary premium for 2021 is $33.06 according to the Centers for Medicare and Medicaid Services (CMS). The notice provided to Medicare-eligible employees helps them understand if they may be subject to a late enrollment penalty if they delay enrollment in Part D.

One of two notices must be provided to Medicare-eligible employees. A creditable coverage notice should be provided when the drug benefit is at least as good as the standard Medicare Part D plan. A non-creditable
coverage notice should be provided when the drug benefit is not as good as the standard Part D plan. Most prescription drug benefits included under a group health plan are creditable, but CMS has provided a Simplified
Determination document to help employers figure out the creditable coverage status in the event that’s unknown.

The notice must be distributed prior to October 15th (meaning it must be distributed by October 14th) which is when the Medicare Advantage and Part D annual enrollment period begins. The annual enrollment period
will run through December 7th. The notice must also be distributed at other times, such as when creditable coverage status changes or when a Medicare-eligible employee first joins the plan.

Additionally, the notice should be provided to any covered dependents who are eligible for Medicare, including those who become eligible for Medicare due to a disability. COBRA beneficiaries and covered retirees who are
eligible for Medicare should also be provided a notice. As a best practice, employers may want to provide this notice to everyone covered under their group health plan.

The Internal Revenue Service (IRS) recently issued Rev. Proc. 2020-36 which includes details on the minimum required contribution percentage in determining whether employer-sponsored health coverage is affordable. In 2021, employer-sponsored health coverage will be considered affordable if an employee has to pay no more than 9.83% (an increase of 0.05% from 2020) of their income for such coverage. The affordability percentage is important for multiple reasons, including:

1) Applicable large employers (ALEs) are subject to Employer Shared Responsibility provisions under the Affordable Care Act (ACA). This is more commonly referred to as the Employer Mandate. In order to reduce or eliminate the chance of penalties under the Employer Mandate, part of the requirements state that an affordable offer of coverage must be made. Employers determine if coverage is affordable based on the lowest-priced plan offered to the employee using the self-only premium rate. 

2) If an employee is offered an employer-sponsored health plan that has minimum value and is affordable, then the employee and their family members (i.e. spouse and dependent children) are ineligible for premium tax credits through the Health Insurance Marketplace. It should be noted that the way employers determine affordability of coverage in relation to the Employer Mandate is different than the way employees determine if they have affordable coverage for purposes of premium tax credits.

3) There is a scale that is used (and referenced in Rev. Proc. 2020-36) which aids in determining the amount of a premium tax credit on the Health Insurance Marketplace for those who are eligible for such subsidies. In 2021, the most that an individual or family will have to pay for the second lowest-priced Silver plan on the Health Insurance Marketplace is 9.83% of their modified adjusted gross income. The percentage is reduced for lower income households.

Employers, especially those subject to the Employer Mandate, should plan accordingly for their upcoming 2021 open enrollment periods. Employees and individuals should also be aware of this information to determine potential impact to premium tax credits.

If there is one healthcare program that has benefited from COVID-19, that would seem to be telemedicine (sometimes called telehealth). Telemedicine can generally be described as the remote diagnosis and treatment of patients by means of telecommunications technology. It typically involves a person connecting with a doctor by phone or video chat to discuss a medical condition and determine a course of treatment.

Telemedicine eliminates face-to-face contact between a patient and a doctor. Social distancing, quarantines and stay-at-home orders have led to significantly increased utilization of telemedicine. Some telemedicine providers have reported utilization increases of 500% or more in 2020. Telemedicine now has a significant footprint in the way people receive healthcare services, and that trend is expected to continue post-pandemic.

Employers who provide a telemedicine benefit to employees should understand the impact of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) to those programs. Telemedicine may be included as an underlying benefit of a health insurance plan. In these situations, the telemedicine benefit will automatically be included with any health insurance COBRA offering.

In other situations, telemedicine may be offered by employers as a stand-alone benefit which will be subject to COBRA if the program is considered a group health plan. Section 607 of the Employee Retirement Income Security Act of 1974 (ERISA) defines a group health plan as a plan which provides “medical care” to participants or beneficiaries directly, through insurance, through reimbursement or otherwise.

Medical care is defined in Section 213(d) of the Internal Revenue Code (the “Code”) as services provided for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.

As a result of the definition of a group health plan under ERISA and the definition of medical care under the Code, most stand-alone telemedicine programs will likely be subject to COBRA. This means employers who are subject to COBRA should be fulfilling their compliance obligations for stand-alone telemedicine programs, including the distribution of Initial Notices and Election Notices at the appropriate times. Employees and/or their dependents will generally need be given the right to continue coverage under a stand-alone telemedicine program after a qualifying event has occurred.

Do you remember the days when employers could change from a $500 deductible plan to a $5,000 deductible plan and save 40-50% on insurance premiums? Then those same employers would offer a Health Reimbursement Arrangement (HRA) to cover most or all of the deductible increase for employees who have chronic conditions or who experience unexpected medical events. The net result provided employers with significant savings while providing employees with substantially similar benefits. Those days still exist.

Level-funded insurance plans have grown in popularity over recent years. A level-funded plan is a type of selffunded plan where employers pay an equal premium payment each month, hence the name level-funded plan.

The premium payments are used to pay for claims and administrative expenses. At the end of the year, the insurance company compares money-in (i.e. premiums paid) to money-out (i.e. claims and administrative expenses). If the total money-in is less than the money-out, the employer gets a refund. The insurance company covers the shortfall if the opposite occurs which provides the employer financial protection.

Level-funded plans are subject to some, but not all, of the Affordable Care Act (ACA) market reforms. For example, level-funded plans cannot have an out-of-pocket maximum limit that exceeds $8,150 ($16,300 for families), but level-funded plans can medically underwrite an employer group to establish premium rates. This flexibility allows for the potential of significant savings opportunities compared to traditional group health plans. In addition, level funded plans provide minimum value, so we are not talking about “skinny,” “barebones,” or “MEC” plans. These are rich health insurance plans that provide generous benefits when high-cost medical events occur.

Now, think about a level-funded plan that has a high deductible and a controlled provider network. The savings continue to accrue for employers and can be passed onto employees. Add an HRA on top of that, and employees now have access to a rich health insurance plan with reasonable out-of-pocket limits and access to elite medical providers. All of this for the potential of half the cost of a traditional group health insurance plan.

Health insurance and health care costs can be very expensive, but with a little creativity a lot of that burden can be alleviated. 

Many employee benefit laws only apply to employers who have a certain number of employees. The challenging part is that each law has its own definition and rules on how to count the number of employees when determining if a law applies to an employer. Here are some key examples:

COBRA rules generally apply to employers with 20 or more employees on more than 50% of its business days during the previous calendar year. Employers should count each full-time employee (based on their own definition of a full-time employee) as 1 employee. Each part-time employee counts as a fraction of an employee. For example, if an employer defines a full-time employee as one who normally works 40 hours per week, and a part-time employee works 20 hours per week, the part-time employee will be counted as 0.5.

Medicare Secondary Payer (MSP) rules generally apply to employers with 20 or more employees on 20 or more calendar weeks in the current or preceding calendar year. Employers should count each full-time and part-time employee as 1 employee. Any full-time or part-time employee who is on the employer’s active roster in a given week should be included in the count for that week.

FMLA rules generally apply to employers with 50 or more employees on 20 or more calendar weeks in the current or preceding year. Employers should count each full-time and part-time employee as 1 employee. Any full-time or part-time employee on the employer’s payroll in a given week should be included in the count for that week.

The Employer Mandate rules generally apply to employers with an average of 50 or more full-time equivalent employees in the preceding calendar year. Any employee who works 30 or more hours per week (or 130 hours or more per month) should be counted as 1 full-time employee. The full-time equivalency of a part-time employee is determined each month by taking the total hours worked that month and dividing that number by 120 (e.g. 90 hours worked in a month is the full-time equivalency of (90/120) or 0.75).

Form 5500 reporting requirements generally apply to employers who have 100 or more participants covered by a plan subject to ERISA at the start of the plan year. Each employee covered by the plan at the start of the plan year should be counted as 1 employee regardless of employment status. For  example, fulltime, part-time, and former employees covered by the plan at the start of the plan year should all be counted as 1 employee. Covered family members are considered “beneficiaries” (i.e. not participants) and are not included in the count.

1. What is an Individual Coverage Health Reimbursement Arrangement (ICHRA)? 

An ICHRA allows employers to provide tax-free reimbursements to employees for insurance coverage they obtain on their own in the individual major medical market or through Medicare. Out-of-pocket medical expenses may also be reimbursed.

2. When can employers begin offering ICHRAs?

​ ICHRAs may be offered for plan years beginning on or after January 1, 2020.

3. What type of coverage must an employee have to be eligible for reimbursements through an ICHRA? 

Employees (and any covered dependents) must have individual major medical coverage or Medicare, which includes grandfathered individual plans, grandmothered individual plans, individual plans sold on and off the Exchange, insured student health plans, coverage through Medicare Parts A, B, C, or D and Medicare Supplement health plans.

Employees with short-term medical plans, coverage through another employer’s group health plan or coverage through a health care sharing ministry are not eligible for reimbursements through an ICHRA.

4. What is the maximum reimbursement amount an employer can provide with an ICHRA? 

Employers determine the maximum reimbursement limits; however, the ICHRA must be offered under the same terms to all eligible employees. Reimbursement limits may only vary based on the age and/or family size of employees. If using age-based variations, the maximum reimbursement limit cannot exceed the 3:1 ratio allowed for individual market premium differences. Employers may also optionally permit carryover of unused funds to the following plan year.

5. What reimbursement limit should apply to an employee who gains coverage to an ICHRA midyear, such as a new hire? 

The employer may determine if the full annual reimbursement is to be made available or if a pro-rated amount is to be made available, but whatever option the employer selects, it should be applied consistently.

6. Can an employer offer its employees a choice between a traditional group health plan and an ICHRA? 

No. Employers cannot offer employees a choice between a traditional group health plan and an ICHRA; however, employers can offer one class of employees a traditional group health plan and another class of employees an ICHRA. The permissible classes include:

• Full-time employees
• Part-time employees
• Employees working in the same geographic location (generally, the same insurance rating area, state, or multi-state region)
• Seasonal employees
• Employees in a unit of employees covered by a collective bargaining agreement
• Employees who have not satisfied a waiting period
• Non-resident aliens with no U.S.-based income
• Salaried workers
• Non-salaried workers (such as hourly workers)
• Temporary employees of staffing firms
• Any group of employees formed by combining two or more of these classes

7. Are there any other rules pertaining to employee classifications? 

Yes. A minimum class size rule applies to the ICHRA if an employer offers a traditional group health plan to some employees and an ICHRA to other employees based on:

• Full-time versus part-time status,
• Salaried versus non-salaried status; or
• Geographic location if the location is smaller than a state.

The minimum class size is:

• 10 employees for an employer with fewer than 100 employees,
• 10% (rounded down) of the total number of employees for an employer with 100 to 200 employees; and
• 20 employees for an employer with more than 200 employees.

The class size is determined by the number of employees who are offered access to the ICHRA. Class size is also determined at the common law employer size (not the controlled group size).

Changes to definitions of classes during the plan year are prohibited. Also, through a new hire rule, employers can offer new employees an ICHRA, while grandfathering existing employees into a traditional group health plan.

8. Will coverage through an ICHRA impact an employee’s ability to receive subsidies through an Exchange or Marketplace? 

Yes. Employees who are covered by an ICHRA cannot receive subsidies through an Exchange or Marketplace plan. If, however, the employee waives coverage under the ICHRA, he/she may still be eligible for subsidies to the extent the ICHRA does not provide the employee with access to affordable coverage as defined by the Affordable Care Act (ACA).

9. How can an employer who is subject to the Employer Mandate offer an ICHRA and avoid penalties?

​The ICHRA is considered minimum essential coverage and offering an ICHRA to at least 95% of full-time employees will meet the offer requirements of the Employer Mandate.

Coverage will be considered affordable to an employee if the lowest-priced Silver plan available on the Exchange or Marketplace is no more than 9.5% (adjusted for inflation) of the employee’s household income after considering the ICHRA. Employers are permitted to use the lowest-priced Silver plan based on the employee’s work location rather than their residential address when determining if coverage is affordable. Additionally, because the affordability of coverage is being tied to a Silver plan, an offer of coverage with minimum value will have deemed to have been made.

The Internal Revenue Service (IRS) has expressed that more guidance may be issued to address the interaction between the Employer Mandate and ICHRAs.

10. Are there any written notices that need to be provided to employees? 

Yes. A written notice must be provided to employees which includes general information about the ICHRA, including the reimbursement limits and potential impact to eligibility for subsidies on the Exchange or Marketplace. The Department of Labor (DOL) has provided a model notice which employers can use. It generally must be provided 90 days prior to the start of a plan year or by the first day of coverage for new hires. However, for the first plan year, it can be provided to all employees by the first day of the plan year.

11. How will employers know if employees and family members have individual major medical coverage or Medicare?

​Employers must have employees and covered family members attest each year to having individual major medical coverage or Medicare. The DOL has provided a model attestation form that can be used. Additionally, with every request for reimbursement, an attestation must be obtained which confirms that individual major medical coverage or Medicare coverage is still in place.

12. If the ICHRA does not cover the entire premium for an employee, can the employee pay for their portion of premium pre-tax through a Cafeteria Plan?

​It depends. On-Exchange plans may not be paid pre-tax through a Cafeteria Plan; however, off-Exchange plans and Medicare plans can be paid pre-tax through a Cafeteria Plan.

13. Does the establishment of an ICHRA with a non-calendar plan year create a special enrollment period in the individual major medical market? 

Yes. A special enrollment period will apply in the individual major medical market. It starts 60 days before the effective date of the ICHRA and ends 60 days after the effective date. Additionally, a special enrollment period will apply at each renewal for employees eligible to participate in the ICHRA.

14. Is the ICHRA subject to ERISA?

​Yes, unless the ICHRA is offered by a church or government agency who is exempt from ERISA. The individual major medical plans and Medicare plans won’t be subject to ERISA provided:

• Enrollment in these plans is voluntary; and
• The employer does not endorse any plan or carrier; and
• The employer receives no consideration for enrollments; and
• Employees receive written notice each year that the plans are not subject to ERISA.

15. Is the ICHRA subject to COBRA? 

Yes. The ICHRA is subject to COBRA, but the individual major medical plans and Medicare coverage obtained by employees are not subject to COBRA. However, COBRA does not apply if an employee loses their individual major medical coverage or Medicare coverage during the year (for example, due to non-premium payment). Former employees who continue coverage under the ICHRA by virtue of COBRA must continue to be covered by an individual major medical plan or Medicare plan.

16. Does the employer have to provide employees with a Summary of Benefits and Coverage (SBC) for the ICHRA? 

Yes. SBCs are required to be distributed at the appropriate times when an employer offers an ICHRA.

17. Can an employer offer a Flexible Spending Account (FSA) and the ICHRA to the same class of employees?

Yes. Employees can enroll in an FSA and ICHRA.

18. Will enrollment in an ICHRA eliminate eligibility to participate in a Health Savings Account (HSA)? 

ICHRAs that reimburse out-of-pocket medical expenses will eliminate HSA eligibility. ICHRAs that limit reimbursements to insurance premiums will preserve HSA eligibility. Employers may offer the same class of employees the choice between an ICHRA that only reimburses premiums and an ICHRA that reimburses premiums and out-of-pocket medical expenses, and this will not violate the same terms requirement as referenced in Q&A #4.

19. Can an employer offer ancillary plans such as dental or vision plans in addition to the ICHRA? 

Yes. Ancillary plans can be offered in addition to the ICHRA. The only restriction is that a traditional group health plan and an ICHRA cannot be offered to the same class of employees.

20. What is the difference between a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) and an ICHRA?

The table below outlines some key differences between QSEHRAs and ICHRAs:

21. How do Medicare Secondary Payer (MSP) rules apply to ICHRAs?

Nothing in the final rules changes the application of the MSP provisions. The Department of Health and Human Services (HHS) intends to issue further guidance clarifying the primary versus secondary payer responsibility of ICHRAs for employers subject to the MSP provisions.

22. Are there any new reporting requirements for ICHRAs?

There are no new reporting requirements that were created for ICHRAs; however, the rules do not change any reporting requirements that apply today for group health plans, and an ICHRA is considered to be a group health plan. This may include reporting requirements under the ACA, ERISA, the Code and/or the SSA.

23. What is an Excepted Benefit Health Reimbursement Arrangement (EBHRA)?

EBHRAs are another type of tax-free reimbursement arrangement that employers can begin offering for plan years on or after January 1, 2020. EBHRAs have the following requirements:

• $1,800 maximum reimbursement limit (indexed)
• May only reimburse dental expenses, vision expenses, short-term medical premiums and COBRA premiums
• Must be offered to all similarly situated individuals

24. Can an employer offer an ICHRA and EBHRA to the same employee?

No. An employer cannot offer the same employee an ICHRA and EBHRA; however, an employer may offer a traditional group health plan and an EBHRA to the same employee. The employee may participate on the EBHRA even if they waive coverage under a traditional group health plan.

25. Where can I find additional information on ICHRAs and EBHRAs?

The final rule, news release and FAQ can be accessed by clicking on the appropriate hyperlink.

What do ICHRAs and 401(k) Plans Have in Common?

The short answer is that they are both defined contribution plans. The Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-sponsored defined contribution health plan
whereas a 401(k) is an employer-sponsored defined contribution retirement plan.

Overview of ICHRAs

An ICHRA is a new type of healthcare benefit program that became available as of January 1, 2020. Rather than providing a traditional group health plan to employees, ICHRAs allow employers to reimburse employees (and their dependents) for insurance premiums of health insurance coverage they obtain on their own in the individual market or through Medicare. Employers establish maximum monthly or annual reimbursement limits for each employee which may also allow for the reimbursement of out-of-pocket medical expenses. In other words, employers who sponsor an ICHRA have a really good idea of what their maximum spend on healthcare will be each year.

ICHRAs are different than traditional group health plans offered by many mid-size and large employers. These employers historically have offered employees a self-funded group health plan which is a type of defined benefit plan. Self-funded group health plans promise employees specific benefits, but the actual cost to the employer is based on the overall utilization of healthcare. Employers who sponsor a self-funded group health plan usually rely on historical utilization data to estimate costs for a future plan year, but the actual costs to the employer will be based on the number of office visits, hospitalizations, prescriptions and other medical services their employees need during the year. In other words, employers know the benefit they have to provide to the employees, but they don’t know their actual healthcare costs until the year is over.

So how are ICHRAs Similar to 401(k) plans?

ICHRAs have been compared to 401(k) plans even though one is a healthcare program and the other is a retirement program. Seems like two completely things, right? Certainly, healthcare plans and retirement plans can be viewed differently, but the financial concept is similar.

With a 401(k) plan, employers also fix contributions to their employee’s retirement accounts. This is usually done by contributing a specific dollar amount, a specific percentage of an employee’s salary, or by matching employee contributions up to specific limit. Whatever method the employer elects, they are defining their maximum contribution for the year. Employers have a really good idea of what their maximum spend on retirement costs will be each year like an ICHRA does with healthcare costs.

This is different from defined benefit retirement plans, the most well-known of which would be a pension plan. Pension plans guarantee a specific benefit amount to each employee in retirement. The amounts generally vary based on salary and years of service. The employer is responsible for setting enough money aside, investing that money and distributing it to employees throughout their retirement. The employer bears the risk when markets are down or if there is insufficient money to distribute to retirees from the pension fund. In other words, it’s much harder to predict costs.

401(k) plans have been around much longer than ICHRAs, but in just a short period of time some people are referring to ICHRAs as “401(k) Healthcare” due to the defined contribution similarities between the two programs.

In just a very short period of time, the Coronavirus Disease (COVID-19) is impacting health plans and health care throughout the country. Here are some key examples of recent developments:

✓ The Internal Revenue Service issued Notice 2020-15 which allows qualified high deductible health plans (HDHPs) to cover testing and treatment for the Coronavirus Disease prior to the deductible being satisfied. This preserves the eligibility for people covered by an HDHP to make contributions to their Health Savings Account (HSA).

✓ A bill has been introduced in the House of Representatives, H.R. 6173, which would require health insurance carriers to cover the full cost of Coronavirus tests without any cost sharing requirements for the member. Coronavirus testing would be added to the list of covered preventive services required under the Affordable Care Act (ACA). Even though this bill is not yet law, many health insurance carriers are already providing coverage for Coronavirus testing at no cost to the member.

✓ The state of Washington, one of the areas in the country hit hardest by the Coronavirus Disease, is providing a limited special enrollment period on their state-based exchange. Anyone without health insurance in Washington can enroll in an individual health plan until April 8th. Other exchanges may follow suit.

✓ Some pharmacies like CVS are providing free home delivery of medications during this time.

Additionally, for those individuals who do incur medical costs related to the Coronavirus Disease, they can be assured that these expenses are eligible for reimbursement under their Health Flexible Spending Account (FSA), Health Savings Account (HSA), and in some instances their Health Reimbursement Arrangement (HRA).

As the situation with the Coronavirus Disease continues to evolve, we are likely to see more changes related to health care coverage and treatments.

The Centers for Medicare & Medicaid Services (CMS) recently announced plans to pilot healthcontingent wellness programs in the individual market, a practice that has been previously prohibited. However, the Affordable Care Act (ACA) included a provision calling for health-contingent wellness  programs to be tested in the individual market, and that time has now come.   

In the past, only participatory wellness programs have been allowed in the individual market. Participatory wellness programs reward individuals for participating in the wellness program without assessing if it led to health-related outcomes. Health-contingent wellness programs reward people for not only participating in a wellness program, but also meeting a specific health standard, such as losing weight, lowering cholesterol levels or reducing/eliminating tobacco usage.  

In a bulletin issued on September 30, 2019, CMS indicated they are seeking applications from states to participate in the pilot program. It is anticipated that 10 states will be selected to participate in the pilot program. The states selected will be able to offer lower premiums or offer other incentives to individuals meeting the requirements of the health-contingent wellness program. 

CMS has indicated it won’t approve applications from states if it will lead coverage losses or rises in the cost of federal subsidies which are provided through the Health Insurance Marketplace. The wellness programs also can’t discriminate based on health status, and an alternative to the wellness program will have to be provided for individuals who can’t participate due to a medical condition. 

Collectively, the Department of Health and Human Services (HHS), Department of Labor (DOL) and Department of Treasury (DOT) will evaluate the effectiveness of the pilot program. If the pilot program is deemed effective, the application process will open to additional states.

The Affordable Care Act (ACA) created a research institute known as the Patient-Centered Outcomes Research Institute (PCORI). The goal of PCORI is to help patients and those who care for them make better informed decisions about healthcare choices. PCORI is funded by temporary fees which are charged to health plans. The following information is designed to help employers understand their upcoming payment obligations in 2020. 

Fee Amount – The fee is $2.45 per covered person for plan years ending between January 1, 2019 and September 30, 2019. In other words, health plans with effective dates of January 2, 2018 through October 1, 2018 will be subject to making a final PCORI fee payment in 2020. Please note that plans with effective dates starting on or after October 2, 2018 will not be subject to paying the PCORI fees.   

Plan Year Ending Date – This is the last day of the plan year. As an example, a plan that had a July 1, 2018 effective date would have a plan year ending date of June 30, 2019. 

Due Date – The fees are due by July 31, 2020.

Fully-insured health plans – The insurance company is responsible for paying the PCORI fee, though most employers with fully-insured health plans are indirectly paying these fees through slightly higher premiums.   

Self-insured and Level-funded health plans – The employer is responsible for paying the PCORI fee. The fee is determined based on the average number of covered lives in the applicable plan year ending in 2019. An easy way to calculate the average number of covered lives is using a snapshot method. Under this method, an employer picks one day during each quarter of the plan year (e.g. Jan 1, Apr 1, Jul 1, Oct 1), adds the total number of covered lives (including spouses and dependents) for those days, and divides that number by 4.

Non-Integrated HRAs – These are Health Reimbursement Arrangements (HRAs) which are not tied to a traditional group health plan and will generally include Qualified Small Employer HRAs (QSEHRAs) and certain Retiree HRAs. The PCORI fee for these types of HRAs should be calculated the same way as the self-insured and level-funded health plans referenced above. However, if the non-integrated HRA only reimburses dental and/or vision expenses, no PCORI fee applies to the HRA. 

Special Rules for Integrated HRAs – These are HRAs that are only available to employees also enrolled in a traditional group health plan. Employers that have a fully-insured health plan coupled with an integrated HRA must pay the PCORI fee for the HRA, but they may treat each HRA participant as a single covered life. In other words, the fee generally does not apply to spouses or dependents covered under the HRA. Employers with a self-insured health plan and an integrated HRA may treat the coverage as a single plan assuming both plans have the same plan year.

FSAs – Flexible Spending Accounts (FSAs) are not subject to PCORI fees if they are excepted benefits. To be considered an excepted benefit, employees must be offered a traditional group health plan, and if the employer contributes to the FSA, the employer may not contribute more than (the greater of) $500 or a dollar-for-dollar match of the employee’s contribution. 

HSAs – Health Savings Accounts (HSAs) are not subject to PCORI fees. 

Dental and Vision Plans – Stand-alone dental and vision plans are not subject to PCORI fees. 

Making Payments – Employers should complete Form 720 for the second quarter of  2020 to make payments. Form 720 and associated instructions are typically updated each April, and employers should check this website in April 2020 to see if the appropriate form version and instructions are available.