The 21st Century Cures Act - The Hidden Impact to Small Employers
In December of 2016, President Obama signed into law the 21st Century Cures Act. While the majority of the bill relates to biomedical research funding and new regulations for new drugs and medical devices, tucked away in this law is an important Affordable Care Act (ACA) reversal that offers more insurance choices for small employers.
Formerly called the Small Business Healthcare Relief Act, Title 18 of the 21st Century Cures Act reverses the regulation in the ACA that restricted small employers (those with less than 50 full-time equivalent employees) from using a Stand Alone Health Reimbursement Arrangement (HRA) to provide pre-tax dollars to their employees to help pay for the cost of ACA compliant individual health insurance policies.
While this was a common practice prior to the enactment of the ACA, the ACA imposed significant fines of up to $36,500 per employee per year for providing pre-tax dollars to employees for health insurance, even if the employer didn’t offer a group health plan.
With the passage of this law, effective January 1, 2017, small businesses may now offer a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) to reimburse employees for premiums on an individual health plan. Here are the details:
- Must have less than 50 full-time equivalent employees
- Must be funded solely by the employer without salary reduction contributions
- Cannot offer a group policy as well
- Reimbursement must be available on the same terms to all employees
- Except for age and family size
- Provide reimbursement after employee provides proof of Minimum Essential Coverage (MEC)
- Limited annual contribution to $4,950 for individuals and $10,000 for family
Until now, small employers only had two options: (1) either offer a group health plan or (2) not offer insurance at all. While this could be a great third option for small employers, before you drop your group health plan and set up a QSEHRA, there should be careful consideration in regards to the impact this will have on both the employer and its employees.
Not sure if a QSEHRA or a group health plan is the best option for your small business? Reach out to myself, or a member of the ‘A’ Team, and we we'd be happy to assist.
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