Gift from Congress
In the closing hours of the lame-duck session of the 114th Congress, small business got a gift in the form of the 21st Century Cares Act. This Act allows small businesses (less than 50 employees) to reimburse employees for individual health insurance premiums beginning January 1, 2017 through a special type of Health Reimbursement Arrangement (HRA).
Under the Affordable Care Act (ACA or Obamacare), these employers are not required to provide group health insurance for employees. However, the IRS and the Department of Labor had ruled that HRAs which reimbursed employees for individual coverage violated the ACA and could subject the employer to an excise tax of $100.00 per day per employee covered under the HRA. This forced small employers to either offer expensive group health insurance benefits or forego providing this type of benefit.
In order to provide these HRAs (referred to in the Act as “qualified small employer health reimbursement arrangement”) an employer must establish: i) they are not subject to the mandate to provide health insurance benefits under the ACA, and ii) they do not provide group health insurance benefits to employees. For the HRA to qualify under this new law it must meet certain restrictions. The reimbursement cannot exceed $4,950 for an individual and $10,000.00 for a family. The employee must provide proof of coverage and premium payment or payment for medical expenses for themselves or their family. The employer must offer the HRA to all eligible employees on the same terms (e.g. if you reimburse 50% of premiums for some, must do it for al)
It is important to note employers have until March 13 of this year to give employees notice and implement an HRA for this year. There are other technical requirements the HRAs must meet to qualify, so if you are interested in offering this benefit you should consult your employment attorney or accountant.
Clearly employers of all sizes face uncertainty in the health care market this year as Congress gears up to repeal the ACA. The 21st Century Cures Act is a bright spot in that murky horizon, at least for the small business employer.