CMS-10704 HRA Supporting Statement 30d

Supporting Statement - Part A
Health Reimbursement Arrangements and Other Account-Based Group Health Plans
(CMS-10704/OMB control number: 0938-1361)
A. Background
The Department of the Treasury, the Department of Labor, and the Department of Health
and Human Services (collectively, the Departments) issued final regulations on June 20,
2019, titled “Health Reimbursement Arrangements and Other Account-Based Group Health
Plans” (84 FR 28888) under section 2711 of the PHS Act and the health nondiscrimination
provisions of HIPAA, Public Law 104-191 (HIPAA nondiscrimination provisions). The
regulations expand the use of health reimbursement arrangements and other account-based
group health plans (collectively referred to as HRAs). In general, the regulations expand the
use of HRAs by eliminating the current prohibition on integrating HRAs with individual
health insurance coverage, thereby permitting employers to offer individual coverage HRAs
to employees that can be integrated with individual health insurance coverage or Medicare.
Under the regulations employees will be permitted to use amounts in an individual coverage
HRA to pay expenses for medical care (including premiums for individual health insurance
coverage and Medicare), subject to certain requirements.
B. Justification
1. Need and Legal Basis
Under section 45 CFR 146.123(c)(5) of the final regulations, “Health Reimbursement
Arrangements and Other Account-Based Group Health Plans,” an HRA must implement
reasonable procedures to annually verify that individuals whose medical care expenses are
reimbursable by the HRA are, or will be, enrolled in individual health insurance coverage
(other than coverage that consists solely of excepted benefits) or Medicare Part A and B or
Part C for the entire plan year on or before the first day of the plan year, or, for an individual
who is not eligible to participate in the individual coverage HRA on the first day of the plan
year, by the date of enrollment in the individual coverage HRA (annual coverage
substantiation requirement).
In addition to the annual substantiation of coverage, with each new request for
reimbursement of an incurred medical care expense for the same plan year, the regulations
provide that the HRA may not reimburse a participant for any medical care expenses unless,
prior to each reimbursement, the participant provides substantiation that the participant and,
if applicable, any dependent(s) whose medical care expenses are requested to be reimbursed
were enrolled in individual health insurance coverage (other than coverage that consists
solely of excepted benefits) for the month during which the medical care expenses were
incurred. The attestation may be part of the form used for requesting reimbursement.

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To satisfy this requirement, the HRA may require that the participant submit an attestation or
a document provided by a third party (for example, an explanation of benefit or insurance
card) as substantiation.
In addition, section 45 CFR 146.123(c)(6) includes a requirement that an HRA provide
written notice to eligible participants. The HRA is required to provide a written notice to
each participant at least 90 days before the beginning of each plan year. For participants who
are not yet eligible to participate at the beginning of the plan year (or who are not eligible
when the notice is provided at least 90 days prior to the beginning of the plan year), the
HRA must provide the notice no later than the date on which the participant is first eligible
to participate in the HRA. However, the HRA is encouraged to provide the notice as soon as
practicable prior to the date a participant becomes eligible. If the HRA is sponsored by an
employer that is established less than 120 days prior to the beginning of the first plan year of
the HRA, the notice may be provided no later than the date on which the participants are
first eligible to participate in the individual coverage HRA.
Under section 45 CFR 146.123(c)(1)(iii), if an individual’s health insurance coverage is
cancelled or terminated, including retroactively, for failure to pay premiums or any other
reason (for example, a rescission), the individual coverage HRA must require that the
individual notify the HRA that coverage has been cancelled or terminated and the date on
which the cancellation or termination is effective.
2.

Information Users
HRAs will need the verification of individual coverage to ensure that participants and
dependents are enrolled in individual health insurance coverage or Medicare and are eligible
to receive reimbursements. The notice sent by the HRAs to eligible participants will ensure
that they understand the terms of the HRA, the right to opt out and the consequences of
enrolling in the HRA. HRAs will also need to know when an enrollee’s individual market
coverage is terminated in order to stop issuing reimbursements from the HRA. HHS will
also need the recommendation from state authorities in order to take the steps necessary to
protect the state’s small group market.

3.

Use of Information Technology
The documents related to substantiation of individual health insurance coverage, notices to
eligible participants, notification of termination of coverage, and the recommendation from
state authorities may be provided electronically.

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4.

Duplication of Efforts
There is no duplication of efforts for these information collection requirements (ICRs).

5.

Small Businesses
Small businesses are not significantly affected by this collection.

6.

Less Frequent Collection
If this information collection is conducted less frequently, eligible individuals will not have
information regarding the HRAs being offered by their employers in order to make informed
decisions and the HRAs will not be able to confirm that participants are eligible to receive
reimbursements from the HRAs.

7.

Special Circumstances
There are no special circumstances.

8.

Federal Register/Outside Consultation
A Federal Register notice was published on September 6, 2019 (84 FR 46951), providing the
public with a 60-day period to submit written comments on the ICRs. We received one
comment, which is summarized in Appendix A.

9.

Payments/Gifts to Respondents
No payments or gifts are associated with these ICRs.

10. Confidentiality
Privacy of the information provided will be protected to the extent provided by law.
11. Sensitive Questions
These ICRs involve no sensitive questions.
12. Burden Estimates (Hours & Wages)
To derive wage estimates, we generally used data from the Bureau of Labor Statistics to
derive average labor costs (including a 100 percent increase for fringe benefits and

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overhead) for estimating the burden associated with the ICRs. 1 Table 1 below presents the
mean hourly wage, the cost of fringe benefits and overhead, and the adjusted hourly wage.
As indicated, employee hourly wage estimates have been adjusted by a factor of 100
percent.
TABLE 1: Adjusted Hourly Wages Used in Burden Estimates

Occupation Title

Compensation and Benefits Manager
Lawyer

Benefits and Adjusted
Mean HourlyFringe
Hourly
Occupational
Wage
Wage
Code
Overhead
($/hour)
($/hour)
($/hour)
11-3111
$63.87
$63.87
$127.74
23-1011
$69.34
$69.34
$138.68

ICRs Regarding Substantiation of Individual Health Insurance Coverage (45 CFR
146.123(c)(5))
An HRA must implement reasonable procedures to annually verify that participants or
dependents, whose medical care expenses are reimbursable by the HRA are, or will be,
enrolled in individual health insurance coverage or Medicare for the entire plan year on or
before the first day of the plan year, or, for an individual who is not eligible to participate in
the individual coverage HRA on the first day of the plan year, by the date HRA coverage
begins (annual coverage substantiation requirement).
In addition to the annual substantiation of coverage, with each new request for
reimbursement of an incurred medical care expense for the same plan year, the final rules
provide that the HRA may not reimburse a participant for any medical care expenses unless,
prior to each reimbursement, the participant provides substantiation that the individual on
whose behalf reimbursement of medical care expenses are requested to be reimbursed were
enrolled in individual health insurance coverage or Medicare for the month during which the
medical care expenses were incurred. The attestation may be part of the form used for
requesting reimbursement.
To satisfy these substantiation requirements, the HRA may require that the participant
submit a document provided by a third party (for example, an explanation of benefits or
insurance card) showing that the participant and any dependent(s) covered by the individual
coverage HRA are, or will be, enrolled in individual health insurance coverage or Medicare

1

See May 2018 Bureau of Labor Statistics, Occupational Employment Statistics, National Occupational
Employment and Wage Estimates at https://www.bls.gov/oes/current/oes_stru.htm .

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during the plan year or an attestation by the participant stating that the participant and any
dependent(s) are, or will be, enrolled in individual health insurance coverage or Medicare,
the date coverage began or will begin, and the name of the provider of the coverage.
Additionally, nothing in the final rules would prohibit an individual coverage HRA from
establishing procedures to comply with the substantiation requirements through electronic
means, so long as the procedures are reasonable to verify enrollment. The ongoing
substantiation may be in the form of a written attestation by the participant, which may be
part of the form used for requesting reimbursement and which will minimize the burden on
plan sponsors and participants. The ongoing substantiation requirement may also be satisfied
by a document from a third party. The associated cost of substantiation will be minimal and
is, therefore, not estimated.
The Departments released guidance providing model attestation language, separate from the
regulations. However, individual coverage HRAs will not be required to use the model
attestation. For those HRAs that elect to use the model attestation language provided by the
Departments, it will further reduce burden for HRAs and participants.
ICRs Regarding Notice Requirement for Individual Coverage HRA (45 CFR 146.123(c)(6))
An HRA is required to provide a written notice to eligible participants. In general, the HRA
will be required to provide a written notice to each participant at least 90 days before the
beginning of each plan year. For participants who are not yet eligible to participate at the
beginning of the plan year (or who are not eligible when the notice is provided at least 90
days prior to the beginning of the plan year), the HRA must provide the notice no later than
the date on which the HRA may first take effect for the participant. However, the
Departments encourage the HRA to provide the notice as soon as practicable prior to the
date the HRA may first take effect. The final rules provide that if the HRA is sponsored by
an employer that is established less than 120 days prior to the beginning of the first plan year
of the HRA, the notice may be provided no later than the date on which the HRA may first
take effect for the participant.
The written notice will be required to include certain relevant information, including a
description of the terms of the HRA, including the maximum dollar amount made available
that is used in the affordability determination under the Code section 36B rules including
information on when the amounts will be made available (for example, monthly or annually
at the beginning of the plan year); a statement of the right of the participant to opt-out of and
waive future reimbursement under the HRA; a description of the potential availability of the
PTC for a participant who opts out of and waives an HRA if the HRA is not affordable
under the PTC rules; a description of the PTC eligibility consequences for a participant who
accepts the HRA; a statement on how the participant may find assistance for determining
their individual coverage HRA affordability; a statement that the participant must inform
any Exchange to which they apply for advance payments of the PTC of certain relevant

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information; contact information (including at least a phone number) of an individual or a
group of individuals who participants may contact with questions regarding the individual
coverage HRA; a statement that the participant should retain the written notice because it
may be needed to determine whether the participant is allowed the PTC; a statement that the
HRA may not reimburse any medical care expense unless the substantiation requirements
are satisfied; a statement of availability of an SEP for employees and dependents who newly
gain access to the HRA; the date as of which coverage under the HRA may first become
effective and the date on which the HRA plan year ends; and a statement to clarify further
that there are multiple types of HRAs and the type the participant is being offered is an
individual coverage HRA.
The written notice may include other information, as long as the additional content does not
conflict with the required information. The written notice will not need to include
information specific to a participant.
The Departments provided model language on certain aspects of the notice that are not
employer-specific, including model language describing the PTC consequences of being
offered and accepting an individual coverage HRA, how the participant may find
information to determine whether the individual coverage HRA offered is affordable, and
language to meet the requirement to include a statement regarding the availability of an SEP
in the individual market for individuals for whom an individual coverage HRA is newly
made available. While the Departments hope it will be useful to employers, plan sponsors
will not be required to use the model language and the final rules do not prohibit an
employer from providing more individualized notices, such as different notices for different
classes of employees, if the employer so chooses.
HHS estimates that for each HRA plan sponsor, a compensation and benefits manager will
need 2 hours (at $127.74per hour) and a lawyer will need 1 hour (at $138.68 per hour) to
prepare the notices. The total burden for an HRA plan sponsor will be 3 hours with an
equivalent cost of approximately $394. This burden will be incurred the first time the plan
sponsor provides an individual coverage HRA. In subsequent years, the burden to update the
notice is expected to be minimal and therefore is not estimated. If the HRA plan sponsor
elects to use the model notice, the burden may be reduced.
HHS estimates that in 2020, an estimated 1,203 state and local government entities will offer
individual coverage HRAs. 2 The total burden to prepare notices will be approximately 3,610
2

U.S. Department of the Treasury, Office of Tax Analysis simulation model suggests that in 2020, approximately
80,000 employers will offer individual coverage HRAs, with 1.1 million individuals receiving an offer of an
individual coverage HRA. These numbers will increase to 200,000 employers and 2.7 million individuals in 2021
and to 400,000 employers and 5.3 million individuals in 2022. The Departments estimate that there is, on average, 1
dependent for every policyholder. The Departments also estimate that approximately 2 percent of employers are
state and local government entities, accounting for approximately 14 percent of participants.

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hours with an equivalent cost of approximately $474,273. In 2021 approximately 1,805
additional state and local government entities will offer individual coverage HRAs for the
first time and will incur a burden of approximately 5,415 hours with an equivalent cost of
approximately $711,410. In 2022, approximately 3,008 additional state and local
government entities will offer individual coverage HRAs for the first time and will incur a
burden of approximately 9,024 hours with an equivalent cost of approximately $1.19
million.
HRA plan sponsors will provide the notice to eligible participants every year. HHS estimates
that HRA plan sponsors will provide printed notices to approximately 99,178 eligible
participants 3 in 2020, 243,438 eligible participants in 2021 and 477,859 eligible participants
in 2022. HHS anticipates that the notices will be approximately 6 pages long and the cost of
materials and printing will be $0.05 per page, with a total cost of $0.30 per notice. It is
assumed that these notices will be provided along with other benefits information with no
additional mailing cost. HHS assumes that approximately 54 percent of notices will be
provided electronically and approximately 46 percent will be provided in print along with
other benefits information. Therefore, in 2020, state and local government entities providing
individual coverage HRAs will print approximately 45,622 notices at a cost of
approximately $13,687. In 2021, approximately 111,981 notices will be printed at a cost of
approximately $33,594 and in 2022, approximately 219,815 notices will be printed at a cost
of approximately $65,945.
TABLE 2. Annual Burden and Costs
Response Type: R=reporting; RK=recordkeeping; TPD=third-party disclosure

CFR
Section

45 CFR
146.123(c)
(6)

Year

Number of
Respondents

Number of
Responses

Burden
per
Response
(hours)

Total
Annual
(Hours)

Labor
Rate
($/hour)

Cost Per
Response

Total Cost

Frequency
Response
Type

2020

1,203

99,178

3

3,610

$131.39

$0.30

$487,960

2021

1,805

243,438

3

5,415

$131.39

$0.30

$745,004

2022

3,008

477,859

3

9,024

$131.39

$0.30

$1,251,628

3 year
Average

2,005

273,492

3

6,016

$131.39

$0.30

$828,197

TPD

Annual

3

U.S. Department of the Treasury, Office of Tax Analysis simulation model provides estimates of the number of
participants and dependents offered an individual coverage HRA. Number of eligible participants is estimated based
on the assumption that 75 percent of eligible participants will enroll in their employers’ plans. See Kaiser Family
Foundation, “2017 Employer Health Benefits Survey”, Section 3, https://www.kff.org/healthcosts/report/2017employer-health-benefits-survey/.

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ICRs Regarding Notification of Termination of Coverage (45 CFR 146.123(c)(1)(iii))
If an individual’s health insurance coverage is cancelled or terminated, including
retroactively, for failure to pay premiums or any other reason (for example, a rescission), the
individual coverage HRA must require that the individual notify the HRA that coverage has
been cancelled or terminated and the date on which the cancellation or termination is
effective. The associated cost of this notification will be minimal and is, therefore, not
estimated.
13. Capital Costs
There are no capital costs.
14. Cost to Federal Government
There is no cost to the federal government.
15. Changes to Burden
There is no change in burden.
16. Publication/Tabulation Dates
There are no plans to publish the outcome of the information collection.
17. Expiration Date
The expiration date will be displayed on the first page of each instrument (top, right-hand
corner).

ATTACHMENTS:
1. INDIVIDUAL COVERAGE HRA MODEL ATTESTATIONS
2. INDIVIDUAL COVERAGE HRA MODEL NOTICE
3. APPENDIX A: COMMENT & RESPONSE SUMMARY

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