In case you missed it, the 21st Century Cures Act passed the House and Senate with overwhelming support, and was signed into law earlier this month. The law included a multitude of important provisions including additional cancer research funding, eased regulatory burdens for pharmaceutical R&D, and an important provision designed to provide small businesses an opportunity to offer health reimbursement arrangements without fear of punishment by the IRS.
What is Small Business Healthcare Relief?
One of the components of the 21st Century Cures Act was a provision regarding small business health reimbursement arrangements (“HRAs”), in section 18001 of the bill on page 824.
Background: Small Business Health Care Relief
The current provision is similar to another bill, Small Business Health Care Relief Act (H.R. 5447), which was a bipartisan bill sponsored by Charles Boustany, Jr. (R-LA) and co-sponsored by 59 representatives (37 R, 22 D) sought to allow small employers to offer a qualified small employer health reimbursement arrangement (QSEHRA).
This was an important issue for representatives on both sides of the table, as it provided small businesses, the backbone of this nation, the opportunity to offer a qualified small employer health reimbursement arrangement (QSEHRA), so long as the employee provide proof of having minimum essential health insurance coverage, as defined for purposes of the individual mandate.
Replacing the “No Good Deed Goes Unpunished” Regulations
Prior to this bill becoming law, the IRS could penalize small businesses offering HRAs up to $36,500 per employee per year, 18 times more than the penalty for not offering coverage. We provided in-depth coverage of the bill in this article.
Healthcare Relief Provision as Part of 21st Century Cures Act
According to ECFC, this provision would establish new small employer health reimbursement arrangements so that eligible small employers can offer a health reimbursement arrangement funded solely by the employer that would reimburse employees for qualified medical expenses including health insurance premiums.
The maximum reimbursement that can be provided under the plan is $4,950 or $10,000 if the plan provided for family members of the employee. An employer is eligible to establish a small employer health reimbursement arrange if that employer
- is not subject to the employer mandate under the Affordable Care Act (i.e., less than 50 full time employees) and
- does not offer a group health plan to any employees. The bill provides that employees that are covered by this health reimbursement arrangement will not be eligible for subsidies for health insurance purchased under an exchange during the months that they are covered by the employer’s health reimbursement arrangement.
For eligible small employers, this bill would overturn guidance issued by the Internal Revenue Service and the Department of Labor that stated that these arrangements violated the Affordable Care Act insurance market reforms and were subject to a penalty for providing such arrangements. The agency guidance would still prohibit these arrangements for larger employers. The provision is effective for plan years beginning after December 31, 2016. (There was transition relief for plans offering these benefits that ends December 31, 2016.)
Why This Matters for Small Businesses
For small businesses (<50 FTE), many of whom do not have a HR Department, the ability to offer group health was a pipedream, as costs, complexity, and time needed made it nearly impossible to provide group coverage. This provision in the new law allows these small businesses to offer an option more affordable for them while allowing these businesses to remain competitive for top talent.
18 Months in the Making
Healthcare Trends Institute sponsor WEX Health was a major player in the original bipartisan bill (H.R. 5447), as well as the bill’s move to the much larger 21st Century Cures Act, joining other benefits and HR organizations including the National Federation of Independent Businesses (NFIB), the Council for Affordable Health Coverage, the U.S. Chamber of Commerce, the National Association for the Self Employed, and ECFC and many more business and nonprofit groups.
Learn more about the law by reading the following articles highlighting the implications on the future of healthcare in America:
- HRA Provision in Cures Act Could Be a Shot in the Arm for Ailing Individual Market
- Forbes: Exploring Zane Benefits and WEX Health’s Role in Saving Small Business HRAs
- Modern Healthcare: Could a provision in the Cures Act help stabilize the ACA exchanges?
- PayBefore: President Obama Signs Health Care Law, Opens Doors for Standalone HRAs
- Bill Enables Small Employers to Help Employees Pay for Healthcare
- The Hill: The 21st Century Cures Act will impact small business in a big way
- Business News Daily: Cures Act: What Tax-Advantaged HRAs Mean for Small Business
The 21st Century Cures Act includes many more important provisions, including those for funding of research, easing regulatory burdens on pharmaceutical R&D (hopefully bringing more competition and lower costs), and much more. Read our original overview here.