11 Dec Texas Has History with HRAs And Small Businesses in Texas
Texas has a long and somewhat checkered history when it comes to an employer using a health reimbursement arrangement to pay for an employee’s health care benefit plan.
The main question was always: can an employer legally implement an HRA and permit his employees to use an HRA account to pay the premiums for individual policies.
The State of Texas, paralleling the federal government, essentially said no, that was not permissible. In 2006, the Texas Department of Insurance issued TDI Bulletin 0028-06 which advised insurance carriers and health plans that this method of premium payment for an employee’s plan was not permitted by the Texas Insurance Code. The Department also cited federal statutes as prohibiting such a payment plan.
Fast forward to late 2016 and action by the U.S. Congress in the waning days of the Obama Administration which passed the 21st Century Cures Act exempting certain small employers under certain specific conditions. These “small employers,”generally are companies with fewer than 50 full-time workers. President Obama signed the Act into law on Dec. 13, 2016.
The conflict was obvious: Congress said these particular small employers were now eligible to own a “Qualified Small Employer Health Reimbursement Arrangement” (QSEHRA); The State of Texas said they were not.
Texas Attorney General Ken Paxton was asked to render an opinion to settle the conflict, which he did on Feb. 13, 2018, issuing Attorney General Opinion KP-0179 saying that the new federal Act superseded the State prohibitions which opened the door for their use by those “certain” small employers in Texas.
The big takeaways to know and remember:
QSEHRAs are complicated and have their own rules employers must follow. Employers should consult a knowledgeable advisor or compliance firm to better understand QSEHRAs.
QSEHRAs will NOT provide the same benefits as a comprehensive health benefit plan will, due primarily to statutory limitations. Again, a top notch compliance firm should be your first call.
QSEHRAs, as we are describing here, will fit only employer groups that generally have fewer than 50 full-time employees.
Lastly, do not confuse QSEHRAs as discussed here with the new type of plan or arrangement, Individual Coverage HRAs (ICHRAs) which are the focus of the proposed federal rule. The science, math and limits are pretty well settled now for small employer HRAs but there is a long, long way to go before any new federal rule changes become reality.