Comments to IRS re: Health Reimbursement Arrangements

Internal Revenue Service
Room 5205
Ben Franklin Station
Washington, DC 20044

To Whom It May Concern:

Thank you for the opportunity to comment on the proposed regulations concerning Health Reimbursement Arrangements and Other Account-Based Group Health Plans (REG-136724-17). The ABA’s HSA Council represents banks, insurers and technology companies who service the millions of Americans who finance their health care using a Health Savings Account (HSA) and the qualifying insurance associated with it.As such, we are concerned about the potential impact these proposed regulations may have on the future availability of HSAs.

The Council has generally been supportive of the Administration’s efforts to create more affordable health care coverage options for Americans. But,we also want to make sure that the President’s promise to the millions of Americans who finance their healthcare with an HSA is kept. Our support for association health plans, short-term health plans, state 1332 waivers, and the proposed HRA regulations are contingent on their favorable impact on HSAs.

It appears that the proposed “Excepted Benefit HRAs” (EBHRAs)would not increase the number of Americans eligible to have an HSA because EBHRAs may only be used for “excepted benefits.” It our understanding that excepted benefits generally would not constitute HSA-qualified coverage under current IRS guidance for HSAs. Further, coverage provided by excepted benefits may disqualify individuals covered by HSA-qualified health plans from being eligible to contribute to their HSA.

Accordingly, one potential outcome of this rule, and one we are confident the administration did not intend, is a contraction in HSA eligibility for some employees.

We believe, however, that certain EBHRA plan designs are compatible with HSAs. For example, an EBHRA that is limited to vision and dental expenses should be deemed permissible coverage that does not affect an individual’s ability to fund an HSA. We would appreciate clarification on this point in the final regulation.

Regarding “Individual Coverage HRAs” (ICHRAs),we believe they may provide an opportunity for employers to move to a “defined contribution” approach for their employee health benefits.It is important that under such arrangements employees continue to have access to HSAs when choosing an HSA-qualified plan.Specifically, an ICHRA that only allows for the reimbursement of health insurance premiums should not be considered impermissible coverage, and therefore an employee who uses ICHRA funds to purchase an HSA-qualified plan should be allowed to contribute to their HSA, and their employer should be allowed to contribute as well.The proposed regulations are not clear on this point. We ask that the final regulation clear up this ambiguity to avoid the appearance of conflict between a premium-only ICHRA and an HSA.

Moreover,depending on what employers offer as a contribution through the ICHRA and the plans available to employees in the individual market, employees may be discouraged from seeking HSA-qualified plans in the future. We have created some scenarios below to help illustrate how this might occur.

Scenarios

All scenarios below assume that an employer budgets $15,000 per employee for health benefits(family coverage). The employer offers employees a $10,000 ICHRA to purchase private coverage in the individual market.The employer offers to make a $5,000 employer contribution to the HSAs of employees that use their HRA funds to purchase HSA-qualified coverage.The employer offers a Sec. 125 cafeteria plan so that employees may make additional HSA contributions via payroll deduction.

Scenario #1

Employee A purchases an HSA-qualified policy on the individual market with a premium of $10,000.Employee A establishes an HSA account and the employer makes a $5,000 contribution to Employee A’s HSA.Employee Asigns up for payroll deduction and contributes additional funds to their HSA.

Scenario #2

Employee B purchases an HSA-qualified policy on the individual market with a premium of $8,000.Employee B establishes an HSA account and the employer makes a $5,000 contribution to Employee B’s HSA. Employee B signs up for payroll deduction to contribute additional funds to their HSA.

Scenario #3

Employee C purchases an HSA-qualified policy on the individual market with a premium of $12,000.Employee C establishes an HSA account and the employer makes a $5,000 contribution to Employee C’s HSA. Employee C signs up for payroll deduction and contributes additional funds to their HSA.

Questions/Comments

Question #1: Is there any reason that the employer cannot also offer a Sec. 125 cafeteria plan allowing employees to make additional personal contributions to their HSAs via payroll deduction if they are eligible to do so? We would not want the proposed ICHRAs to create any barrier to employees accessing payroll deduction as a way to make additional contributions to their HSAs.

Question #2: Can employee B choose to have the $2,000 remaining unspent from the HRA re-directed to their HSA?We believe allowing employees the option to have their employer re-direct unspent HRA funds to employees’ HSAs would encourage employees to carefully choose their coverage in the individual market without risk of forfeiting funds as a result of choosing a lower premium plan.

Question #3: Can Employee C use the Employer’s Sec. 125 plan to pay the remaining $2,000 premium cost with pre-tax dollars? If so, could Employee C also make HSA contributions via payroll deduction?

We encourage the agencies to favorably interpret the HRA rules to allow for the best possible coordination with existing HSA guidance. We look forward to working with you on these important matters.