The latest Act i.e. 21st Century Cures Act (Cures) signed by President Barack Obama on the day of Dec. 13, 2016, contains a smorgasbord of health-related provisions and regulations, from reforming federal mental health plans to increasing funding for medical research. Tucked away near the end of the voluminous law is a significant provision that permits small employers to assist their workers with the charges of medical-care expenses, involving premiums for individual health policies, through the utilization of Health Reimbursement Arrangements (HRAs).
Employer-funded medical reimbursement plans, HRAs, have been utilized by employers for years; however their use has been recently restricted. After the enforcement of the ACA (Affordable Care Act), the Internal Revenue Service (IRS) declared that an HRA must be integrated with a group health plan that gives coverage that satisfies the market reforms of ACA for those plans or the employer will be subject to a $100 each day, each worker tax. The rule of IRS was premised on the logic that a stand-alone HRA was a group health plan. Hence, HRAs were subject to the market reforms of ACA, involving the need that a group health plan can’t develop an annual limit on the dollar amount of benefits for any person.
The 21st century Cure Act (Cures) overturns the guidance of IRS in that it allows the utilization of Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs), effective on the day of Jan. 1, 2017. Another thing, to qualify as a QSEHRA, the funds must be invested solely by the employer, must be given to entire workers/employees on the similar terms and can merely be made up to certain annually maximum amounts. Just small employers can take benefit of this latest option – basically those with less than fifty full-time or full-time equivalent employees.
However, the capability to give QSEHRAs is surely welcome news to small employers; the timing of the provision is fascinating provided the uncertainty of ACA. Although, it seems that more flexibility for employers via the utilization of HRAs will be supported by decision-makers in the Washington, D.C., as key part of any latest legislation that replaces the Affordable Care Act (ACA).