Wednesday, January 18, 2017

21st Century Cures Act Allows Small Employers To Use HRA's To Fund Individual Medical Plans

The 21st Century Cures Act, in part, has removed barriers for qualified small employers (under 50 employees) wishing to allow employees to purchase Individual health plans and help pay the premiums on a pre-tax basis.  Previously, this practice was dis-allowed with stiff penalties for those that did.  

In an excerpt from a SHRM post dated December 13, 2016 by Stephen Miller:

President Barack Obama on Dec. 13 signed into law the 21st Century Cures Act, which will let small businesses use health reimbursement arrangements (HRAs) to fund employees who purchase individual health plans on the open market.
The bipartisan bill, which Congress passed Dec. 7, focuses primarily on speeding up drug approvals and making innovative treatments more accessible. But it also includes provisions that affect employer-provided health benefits, specifically using HRAs to pay for nongroup plan premiums and ensuring that a health plan's mental health care benefits are equivalent to its physical health care benefits.
HRA Roadblock Removed
The legislation allows small employers with fewer than 50 full-time employees or equivalents that don't sponsor a group health plan to fund employee HRAs to pay for qualified out-of-pocket medical expenses and for nongroup plan health insurance premiums, including for plans purchased on public health care exchanges under the Affordable Care Act (ACA).
Federal agencies' rules, in particular IRS Notice 2013-54 and DOL Technical Release 2013-03, have frustrated many small employers by preventing them from using so-called "stand-alone HRAs" to reimburse employees who buy nongroup health insurance coverage.
"Many employers were upset when the Obama administration shut down the ability for employers to just provide money on a pretax basis for employees to purchase their own health insurance on the open market—a trend that many saw as the wave of the future," said Brian Pinheiro, chair of the employee benefits group at law firm Ballard Spahr in Philadelphia.
The 21st Century Cures Act, which incorporates key elements of the proposed Small Business Healthcare Relief Act, creates a new type of HRA—the qualified small employer health reimbursement arrangement (QSEHRA). The legislation specifies that:
  • The maximum reimbursement for health expenses that small employers can provide through employee QSEHRAs is $4,950 for single coverage and $10,000 for family coverage, to be adjusted annually for inflation.
  • Small employers that choose to provide QSEHRAs must offer them to all full-time employees except those who have not yet completed 90 days of service, are under 25 years of age, or who are covered by a collective bargaining agreement for accident and health benefits. Part-time and seasonal workers may also be excluded.
  • Generally, an employer must make the same QSEHRA contributions for all eligible employees. However, amounts may vary based on the price of an insurance policy in the relevant individual health insurance market, which in turn can be based on the age of the employee and eligible family members, or the number of family members covered.