Before the Affordable Care Act (ACA) was enacted, small employers often set up health reimbursement arrangements (HRAs) for their employees. They then funded these HRAs and instructed their employees to go out and purchase an individual medical (and vision & dental) policy that met their needs. The employee then submitted proof that they had purchased an individual policy or incurred another eligible expense to the HRA and was reimbursed with pre-tax dollars.
When the ACA became effective, this option disappeared. ACA considers HRAs to be group health plans subject to the annual dollar limit prohibition and the preventive services requirement. This means that in order for an employer to offer a compliant HRA for expenses other than excepted benefits, the HRA must be integrated with a group medical plan.
So, it is with some interest that Gravie has been watching the HR 5447 Small Business Health Care Relief Act of 2016. With the bipartisan support of 59 cosponsors, this bill would amend the current law to provide an exemption for qualified small employer HRAs from some of the requirements that apply to group health plans.
As currently drafted, the bill would consider an employer with less than 50 full-time employees that does not offer a group health plan eligible for this exemption. In order to offer an HRA under this exemption, the HRA would be provided on the same terms to all eligible employees (with some variation allowed for age), be funded solely by the employer, reimburse eligible expenses of an employee and family members upon proof of coverage, and limit annual reimbursements to a prescribed dollar amount (currently $5,130 individual, $10,260 family).
In order to receive pre-tax reimbursements, the employee would be required to have minimum essential coverage (MEC) for the month in which the medical care was provided. The bill also describes the process for determining if an employee with an HRA is also eligible for premium subsidies in the Marketplace.
Clearly this bill, if enacted, would offer a welcomed pre-tax option for small employers interested in offering their employees a way to purchase individual medical insurance that specifically meets the employee’s needs.
As I write this post, we have received notice that the Bill has just been referred to the House Education and Workforce subcommittee on Health, Employment, Labor and Pension. If you are so inclined, reach out to your Representative and offer your support of legislation.
If you are interested in joining Gravie in following this initiative, HB 5447 can be tracked here.
Sue Eaton is a compliance officer at Gravie. She’s responsible for making sure the services and products we offer comply with state and federal laws. Because we understand the importance of compliance and staying on top of ever changing rules and regulations, Sue will be contributing her wisdom regularly to the Gravie Blog. Check out her other posts Square Peg in a Round Hole – Compliance in the Modern World of Health Insurance and HIPPA & MARS-E Compliance.
House Education and the Workforce Subcommittee, Employment, Labor, and Pensions – 09/19/2016