Smaller body shops could benefit from bill currently in committee in the U.S House of Representatives that would provide an exemption for health reimbursement arrangements (HRAs).
Back in June, Republican Louisiana Congressman Charles Boustany and Democrat Mike Thompson of California introduced HR 2911, the Small Business Healthcare Relief Act. The bill is now before the U.S. House Committees on Energy and Commerce, Ways and Means, and Education and the Workforce.
It provides an exemption from certain group health plan requirements related to pre-tax dollars for HRAs, a model that had been essentially erased under the Affordable Care Act (ACA).
“Restoring choice and affordability in the healthcare marketplace is the key to driving down costs and improving accessibility for consumers," Boustany said. "Using Healthcare Reimbursement Arrangements is a creative approach that allows employees to select healthcare plans that are best tailored to fit their needs. Our common-sense bipartisan legislation frees employers to provide their employees with options that will put the individual in charge.”
The bill would allow business and local municipalities with fewer than 50 employees to continue using pre-tax dollars to give employees a defined contribution for healthcare expenses. It would also allow employees to use HRA funds to purchase health coverage on the individual market, as well as for qualified out-of-pocket medical expenses, and would protect cost-sharing options for companies and employees.
A companion bill (S. 1697) was introduced in the Senate by Chuck Grassley (R-Iowa) and Heidi Heitkamp (D-N.C.).
“I’ve heard from farmers, small business owners and accountants who are worried about getting hit with a penalty for something they’ve done for a long time without any controversy," Grassley said. "It doesn’t make sense to tell small employers they can’t help their employees get health insurance. Why disrupt something that worked? Our bill puts this provision back to what it was so farmers and small businesses can use this option as they see fit.”
Based on Treasury Department guidance issued in 2013, HRAs were disallowed because they did not satisfy the Affordable Care Act's minimum benefit and annual dollar cap requirements for health insurance plans offered by employers. Companies that have continued offering HRAs or employer payment plans can be fined as much as $36,500 annually ($100 per day, per employee) in penalties.
The IRS made the change ostensibly to prevent larger companies from using HRAs (and flexible spending accounts) to skirt health insurance coverage requirements under the ACA. The bill currently under consideration would exempt small employers (who aren't required to provide coverage anyway) from the penalties.
Under the ACA, employers with fewer than 50 employees are not required to offer health coverage. There are some mechanisms under the law that allow small employers to reimburse employees for insurance premiums (pre-tax), but HRAs are seen as a more flexible and attractive alternative.
The bill has received support from the U.S. Chamber of Commerce, the National Association for Towns and Townships, the American Farm Bureau Federation (AFBF), the National Association of Manufacturers (NAM), the National Association of Home Builders (NAHB), the National Federation of Business (NFIB), the Small Business Majority, the National Association for the Self Employed (NASE), the Coalition for Affordable Health Coverage (CAHC), the Retail Industry Leaders Association (RILA), and the National Retail Federation (NRF).
You can read the full text of the bill here:
https://www.congress.gov/114/bills/hr2911/BILLS-114hr2911ih.pdf
