Earlier this year, I wrote about HRAs and Colorado law, looking closely at the Colorado Division of Insurance’s stance regarding the use of HRA funds to pay individual health insurance premiums. Long story short, in 2009 the DOI had basically said that HRA funds could not be used to purchase individual health insurance, because the policies would have to conform to the provisions of Article 16, which applies to group health insurance (individual policies don’t have the same mandates, coverage, or underwriting standards as group policies, so they would not be able to conform to the provisions of Article 16). But then at the end of last year, the DOI revisited the HRA question, and published a final agency order regarding the use of HRA funds to purchase individual health insurance. They reversed their earlier position, and said that HRAs could be used to purchase individual health insurance. They included a restriction on the use of HRA funds to purchase CoverColorado policies, as they wanted to discourage employers from shifting sick employees off of a group health insurance plan and onto the state subsidized high risk pool coverage.
This seemed to settle the matter for the most part, but now it’s gotten a bit stickier again.
We recently received a notice from Humana about a new state-mandated page that will be added to their individual health insurance policy, and I’m sure we’ll be getting a similar notification from the other carriers shortly. In a nutshell, the new application page asks whether or not an employer (with 50 or fewer employees) will be paying (directly or via reimbursement) for any portion of the health insurance policy, including by means of an HRA. If the answer is yes, then the applicant has to state whether or not the employer has had a group policy in place in the past twelve months. If the answer to that question is yes, then the applicant will be ineligible for coverage under Colorado law.
Huh? I knew that the DOI had sorted out the HRA issue several months ago, and I didn’t remember anything about a requirement that no group plan have been in place for 12 months before the HRA funds could be used to purchase individual health insurance. I called the DOI, but all they could direct me to was that same final agency order, and they acknowledged that it doesn’t say anything about a 12 month waiting period between coverage under a group plan and eligibility to use HRA funds for an individual policy.
Then I remembered Senate Bill 19. It was signed into law in March, and was meant to give employers more freedom to seek out less expensive ways of covering at least some of the cost of their employees’ health insurance premiums. SB19 allows employers to reimburse their employees for health insurance premiums, either by wage adjustments or through an HRA, as long as the employer has not had a group policy in place in the previous twelve months. This is a major change from the previous law, which forbid any type of wage adjustment to reimburse employees for individual health insurance premiums. But it seems that it might have actually made things more restrictive when it comes to HRAs.
I’ve read everything I can find regarding the use of HRA funds for individual health insurance, and I wasn’t aware of any restriction that prevented an employer from dropping a group plan and going directly to a HRA (if anyone is aware of restrictions of this nature that existed prior to SB19, please leave a comment with details). SB19 appears to relax the restrictions on employers with regards to funding individual health insurance policies, but when it comes to HRAs, that does not appear to be the case. Because of the new law, employers can now use wage adjustments to reimburse employees for individual policies (as long as they haven’t had a group policy in the past twelve months), which wasn’t allowed at all in the past. But the use of HRAs to fund individual policies can now only be done if the employer hasn’t had a group policy in the past twelve months, and that restriction wasn’t found in the DOI final agency order regarding HRAs.
It appears that SB19 has both relaxed and tightened the rules, depending on how you look at it.