On Tuesday December 13, President Obama signed the 21st Century Cures Act, an omnibus health bill with something for everyone. The bill has been described variously as the last, best hope for bipartisan compromise and tucked at the very back of the legislation — is a gift to small business. Title 18 of the new law, allows companies to use Health Reimbursement Arrangements to compensate employees who buy their own insurance.
Beginning on January 1 2017, a company with fewer than the equivalent of 50 full-time employees — that is, a business not subject to the Affordable Care Act’s employer mandate to offer insurance coverage to employees — can reimburse employees’ for purchasing individual health insurance as if it were directly paying the premiums on a group health policy: the employee won’t have to pay taxes on the company’s premium contribution, and the company won’t owe payroll taxes on it, either.
The law sets some conditions for this new benefit: the company cannot offer a separate group health plan, and it must make the reimbursement available on the same terms to all employees, although it can vary the amount the reimbursement based on the employee’s age and family size. The law limits reimbursement to $4,950 for individual insurance, and $10,000 for a family plan, amounts that are indexed for inflation.
“This is great news for small and mid-sized companies that now offer group plans to replace those plans with reimbursed individual coverage”, says Clive Fowler, C.E.O. and founder of Americas Health Options. Americas Health Options provides Fixed Benefit Health Insurance Option plans which include Minimum Essential Coverage (MEC) benefits, which helps businesses do exactly that.
“This levels the playing field for small and mid-sized companies who can’t afford traditional group insurance and who don’t like the administrative aggravation of managing a group plan when they have less than 50 employees”.
“With the Tax penalty taken out of the way, small business owners and C.E.O.s, are now free to choose Fixed Benefit Option plans with MEC. These plans are usually 30% – 50% less expensive than comparable ACA plans and are more benefit rich.” says Mr Fowler.
The Small Business Healthcare Relief Act restores flexibility and choice into the marketplace by:
- Ensuring that small businesses are allowed to use pre-tax dollars to give employees a defined contribution.
- Allowing employees to use these funds as an HRA to purchase health coverage on the individual market, as well as for qualified out-of-pocket medical expenses.
- Protecting small business employers from being unnecessarily financially penalized for providing this option to employees.
Mr Fowler helped to put this into context for small business owners: “Small business owners who want to do right by their employees and offer health benefits, despite not having the capacity to provide employer-sponsored coverage, can now do so. They can now provide cost effective Fixed Benefit Option Plans that are inclusive of MEC. This Small Business Healthcare Relief Act will make a big difference for hard-working folks across our country”
In the past the Internal Revenue Service had barred employers from having a health reimbursement program, or H.R.A., unless it was tied to an existing major medical group health plan — but this new law allows for this to happen. “The government is actually doing something right to help small business which is the backbone of America” says Mr Fowler. “Under the old I.R.S.’s interpretation of the rules, ‘…the sponsor would have a group health plan, and then the H.R.A. might be used for cost-sharing under that health plan’, like deductibles and co-payments, as an add-on.”
The new law resolves most of these complications. (It also waives those penalties for small companies) because a small business can’t offer employees both a group health plan and reimbursement for buying insurance individually, there should be no adverse selection. And the law requires an employee seeking a subsidy from the insurance exchanges to report any company reimbursement to the exchange. The reimbursement will reduce any exchange subsidy dollar for dollar.
The bigger question may be: how much longer will those subsidies be around? Most independent observers agree that repealing the Affordable Care Act without putting an alternative in place will send the individual market into chaos. And thanks to the G.O.P.’s efforts with the Small Business Healthcare Relief Act, more people, including small business owners, natural Republican allies, would be on the receiving end of that chaos — which perhaps might encourage some in Washington to rethink the repealing of Obama Care.
For more information on these changes, or to find out how a Fixed Benefit Options Plan can benefit you, contact us today on 1-877-545-5433 or at email@example.com.