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Pre-Medicare-eligible retirees whose former employers make contributions to stand-alone health reimbursement arrangements would lose their eligibility for federal premium subsidies to purchase coverage in public insurance exchanges, according to regulatory guidance issued Friday.
The guidance —jointly released by the Treasury and Labor Departments--says such an arrangement would constitute “minimum essential coverage” making the retirees ineligible for the federal premium subsidies.
“The stand-alone HRA would constitute an eligible employer-sponsored plan … for any month in which funds are retained in the HRA,” and be considered minimum essential coverage.
As a result, the retiree would not be eligible for the premium subsidy, the notice said.
The notice would curb the appeal of an approach now being considered by employers with retiree health care plans in which the employer would eliminate the plan, but make contributions to retirees' HRAs, which the retirees then draw on to pay part of the premium of a plan purchased through an exchange, with the government paying part of the premium through subsidies.
“Employers may want to provide some help, but their retirees would be hurt if they lost eligibility for exchange subsidies as a result,” said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, N.J.