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Home > Broker > Plan Information > CDH/SmartSpend Info Center > Q&A: New HRA Design Rules


Q&A: New HRA design rules

Harvard Pilgrim will impose limits on the percentage of the deductible that an HRA* can reimburse. These guidelines apply to Massachusetts-based employer groups with 50 or fewer benefit-eligible employees for all business renewing on or after July 1, 2012.

What is Harvard Pilgrim’s new HRA policy?
Effective July 1, 2012, we will not allow Massachusetts-based small-group employers to implement a new HRA that reimburses more than half the dollar amount of the health plan’s in-network deductible. This applies when the health plan has only in-network deductibles as well as when the health plan includes separate in-network and out-of-network deductibles, or deductibles that are combined for in-network and out-of-network services.

Why is Harvard Pilgrim implementing this policy?
When our underwriters and actuaries price our deductible products, they assume a degree of reduced utilization based on members’ being responsible to pay for deductible expenses with their own funds.  However, when an employer-funded HRA reimburses an unacceptably large portion of the deductible, members’ behavior is impacted and the expected utilization reduction at lower HRA levels is less likely to occur.

How does this policy affect new business?
We will not write new business for the above indicated size groups that do not comply with the new guidelines.

How does this policy affect new business with in-force HRAs?
When an employer switches from another carrier to Harvard Pilgrim, the new HRA cannot reimburse more than half the dollar amount of the in-network deductible, regardless of the HRA design attached to the former carrier’s product.

How does this policy impact renewing groups that renew as-is with an in-force HRA that reimburses more than half the dollar amount of the in-network deductible?
For the present time, Massachusetts-based small-group employers who have an in-force HRA with Harvard Pilgrim may retain their current HRA design, even if it reimburses more than half the dollar amount of the in-network deductible. Harvard Pilgrim reserves the right to modify this position in the future.

How does this policy impact renewing groups that remain with Harvard Pilgrim but choose a higher deductible health plan on renewal?
We will allow these employers to apply the same HRA dollar amount to their new in-network deductible. In other words, if an employer reimburses 100% of a $1,000 deductible and moves employees to a plan with a $1,500 deductible, it could reimburse up to $1,000 of the new $1,500 deductible (two-thirds of the deductible). Presently, we do not require that the group comply immediately with the new 50% maximum based on a product change, but we reserve the right to modify this position in the future.

How does this policy impact renewing Harvard Pilgrim groups that choose to add an HRA to an existing deductible product upon renewal?
Their HRAs cannot reimburse more than half the dollar amount of the in-network deductible.

How does this policy affect a new client who has an in-force HRA that does not meet our requirement?
We will not allow the employer to renew the HRA design in connection with an insured product issued by us if it does not meet our requirements, as modified by us from time to time.

How does this policy affect an existing client who is “grandfathered” with a design that does not meet our requirements and changes HRA administrators?
We will not allow the employer to retain an HRA design that does not meet our requirements when changing HRA administrators.

How does this policy affect an existing client that self-administers an HRA that does not meet our requirements and wants to work with a TPA to administer that same HRA design?
We will not allow the employer to retain an HRA design that does not meet our requirements when switching from self-administration to third-party administration of the HRA.

Can a group that reimburses half a $2,000 in-network deductible now buy up to a $1,000 or $1,500 deductible in order to reimburse more than half the deductible?
No. A group that renews with a lower deductible must comply with the 50% rule immediately.

Does it matter whether the HRA reimburses the first half or latter half of the in-network deductible?
No. Regardless of HRA design, reimbursement is limited to no more than half the dollar amount of the in-network deductible.

If an employer wants to reimburse more than half the dollar amount of the in-network deductible, can it do so by turning off the automated electronic eligibility and claims files that Harvard Pilgrim sends to the HRA administrator?
We will not knowingly write new business that includes an HRA that reimburses more than half the dollar amount of the in-network deductible, regardless of who administers the HRA. If we later find that a group is not in compliance with the guidelines, at a minimum we will turn off the weekly electronic eligibility and claims file for that group effective with its renewal, without waiving any other rights we may have against the group.

Does this policy apply to other out-of-pocket expenses for covered services?
No. It applies to deductible expenses only and is applied to the dollar amount of the in-network deductible. Deductibles are among the expenses most commonly reimbursed through an HRA.

How can an employer or broker apply for an exception to this policy?
Harvard Pilgrim will not grant exceptions.

How are you making brokers and employers aware of this new policy? We are communicating at the roll-out of this policy and have incorporated the policy in our ongoing documentation, including:

  • Sending an e-mail to all brokers.
  • Posting the information on our Broker and Employer portals on our public Web site.
  • Adding the policy to the contracts that we have with the administrators to whom we send electronic eligibility and claims files.
  • Adding the policy to our
  • Massachusetts Employer Agreement
  • Massachusetts Small Group Rate Grid.
  • Rate sheets and rate contracts, including those generated through HPOQ (Harvard Pilgrim Online Quoting) and EOR (Easy Online Renewal)
  • Massachusetts Small Group Underwriting Guidelines.
  • HRA/HSA Design Worksheet, which must be completed and signed by the employer before we can set up an electronic feed with a vendor.

How are you making Third-Party Administrators aware of this new policy?

  • Amending contracts with all vendors to whom we send electronic eligibility and claims files to reflect the new policy.
  • Including the information on the HRA/HSA Design Worksheet, which employers sign before we implement an HRA.

What is the penalty for failure to comply?
We anticipate the cooperation of our partners – brokers, employers and vendors – so that we don’t have to enforce any penalties. This new policy is part of our underwriting guidelines, and we have the option (among other remedies) of not writing coverage for groups that violate our underwriting guidelines. For example:

  • Employers: We reserve the right to terminate coverage for new business if we discover a violation within 60 days of the effective date. In other situations, we will not allow the employer to renew with Harvard Pilgrim if the HRA does not meet these guidelines.
  •  Administrator: We reserve the right not to add any new groups to the electronic eligibility and claims files, thus shutting off the administrator from writing new integrated HRA business.
  • Brokers: We will review repeated broker violations on a case-by-case basis and assess our relationship with the broker based on the facts and circumstances of the violation

Why are you applying this policy to Massachusetts-based employers only?
We are reviewing whether to introduce the policy to New Hampshire and Maine at some point in the future.

Why aren’t you applying this policy to larger groups?
We have more flexibility in calculating premiums and can factor in a group’s experience when setting premiums for employers with 51 or more eligible employees, i.e., we can adjust their premiums appropriately if the HRA does not comply with the policy outlined above.

Does this policy apply to Heath Savings Accounts?
No, it applies only to Health Reimbursement Arrangements. See footnote below.  Note that the limitations apply to HRAs paired with our qualified High Deductible Health Plans, including the Harvard Pilgrim Insurance Company Best Buy HSA PPO.

Why doesn’t this policy apply to Health Savings Accounts?
When an employer contributes to an employee’s HSA, the contribution becomes the employee’s immediately and the employer cannot control the employee’s use of that contribution. Therefore, the employee is effectively spending down his personal HSA funds to pay his deductible expenses, rather than an HRA funded solely by the employer.  Our underwriters and actuaries believe that as a result, utilization with an HSA that more closely matches our experience with groups that offer no HRA or an HRA that reimburses less than half the deductible.

How do you expect this policy to affect new sales and renewals?
We believe that these limitations are reasonable and are necessary to have our small group rates accurately reflect the risks we are assuming. In the long run, we believe such a reasonable relationship between the risks being assumed and premiums being charged will benefit the small group market. 

HRA 50% Compliance Grid

 

Situation

Compliance

1

New-to-Harvard-Pilgrim group designs an HRA that is out of compliance

  • If we find out before the effective date, we don’t write the group
  • If we find out after the effective date, the group must comply on anniversary or we terminate the integrated feed
  • In either case, we discuss the issue with the broker and TPA

 

2

New-to-Harvard-Pilgrim group has an existing HRA that is out of compliance with another TPA

Same as No. 1

3

New-to-Harvard-Pilgrim group has an existing HRA that is out of compliance that it has self administered

Same as No. 1

4

Existing Harvard Pilgrim group self-administering an HRA moves to a TPA

No grandfathering exists and the group must meet the 50% requirement

5

Grandfathered Harvard Pilgrim group increases its deductible

Dollar value of the HRA (not the percentage reimbursement of the deductible) is grandfathered

6

Grandfathered Harvard Pilgrim group decreases its deductible

Grandfathering is broken and the group must meet the 50% requirement

7

Grandfathered Harvard Pilgrim group changes TPAs

Grandfathering is broken and the group must meet the 50% requirement

8

Grandfathered Harvard Pilgrim group changes brokers

No impact on grandfathering

9

Grandfathered Harvard Pilgrim group changes from insured to self-insured

No impact on grandfathering