HRA opt-out for QBs and participants
Affordable care Act gives COBRA QBs and HRA participants new options.
A Health Reimbursement Arrangement (HRA) is a self-insured group health plan sponsored and maintained by the employer and subject to COBRA. However, because HRAs offer “minimum essential coverage” according to the Affordable Care Act (ACA), participants enrolled in an HRA are ineligible to enroll in subsidized coverage through the Health Insurance Marketplace (aka Exchange).
Regulators realized that even though HRA participants don’t actually “enroll” in an HRA, in order to be eligible for subsidized coverage through the Marketplace, they would have to create the means for eligible HRA participants to decline HRA coverage. By doing so, the election choices available to Qualified Beneficiaries (QBs) under COBRA must change, as well.
The HRA Opt-out and the Marketplace
IRS Notice 2013-54 provides HRA participants with an annual or permanent opt-out provision. Eligible participants can choose to decline HRA coverage, whether the employer is funding a traditional HRA or offering a Post-Employment Benefit (PEB) spend-down account.
The HRA Opt-out and COBRA
If an employer provided an HRA integrated with the group health plan, to continue coverage under COBRA, QBs had to take the HRA with the group health plan. The choices were to take and pay for both or decline both plans.
It is the consensus of benefit practitioners that when QBs are electing COBRA, a QB can opt-out of electing the HRA and elect the group health plan by itself, since this is the choice offered to eligible employees.