Healthcare Cures for Ailing Small Businesses

Last week, both houses of Congress demonstrated rare, bipartisan behavior when they passed the 21st Century Cures Act – a giant, 996-page piece of legislation largely intended to speed up the discovery of cures for fatal diseases. But when the president signs the bill into law (possibly this week), the Act will also contain a provision that should bring smiles to the faces of small business owners with fewer than 50 full-time employees. The Small Business Healthcare Relief Act (SBHRA) will allow small employers to offer a qualifying health reimbursement arrangement (HRA) that enables workers to pay for medical expenses – including premiums for their own healthcare policies.

Offering an HRA was not possible under the Affordable Care Act. Stand-alone HRAs were considered “noncompliant” under federal law, and employers offering them were subject to huge fines. However, under the new provision that would take effect on January 1, employers without a group health plan would be able to use an HRA to administer employee benefits.

Under the SBHRA provision, stand-alone HRAs would need to be funded exclusively by employer contributions, not salary-reduction contributions, and they would need to be offered to all eligible employees under generally the same terms. Employers could contribute a maximum of $4,950 per year per employee, or $10,000 for an HRA that covers the employee and the person’s family. Employees would need to provide receipts for their medical expenses (or insurance premiums) to receive reimbursement or payments from their employers. In addition, employees would be required to purchase insurance that provides “minimum essential coverage.” These are just a few of the highlights, and there are many other conditions that need to be met. You can read section 18001, which addresses the SBHRA language, here, but small business owners should consult with their financial advisers to learn more.

The passage of the HRA provision is wonderful news for small businesses in many ways. Not only will the ability to offer an HRA make small businesses more attractive to prospective employees, it could also enable those businesses to retain employees for the long term. In addition, the clarity provided by the SBHRA provision will help small businesses understand compliance terms and provide relief from the threat of penalties. It’s a win-win for everyone.

Kudos to Representative Fred Upton (R-Michigan), Senator Lamar Alexander (R-Tennessee), Representative Diana DeGette (D-Colorado), and Senator Patty Murray (D-Washington), for spearheading this effort and including the HRA provision for small businesses. If you operate a small business and need help sorting out what the new law will mean to you, please feel free to contact us at AMDG Financial. We’d be glad to assist you.

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