Proposed bill would roll back HRA penalties
Employers would be able to use standalone reimbursement arrangements (HRAs) to compensate employees for health care expenses under a bipartisan bill recently introduced in Congress.
The Small Business Healthcare Relief Act (H.R. 2911 and S 1697) would roll back Treasury Department guidance that prohibits employers from using standalone HRAs to compensate employees for health care-related expenses.
“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,” said Sen. Charles Grassley (R-Iowa). “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.”
The existing guidance, issued in 2013, says employer reimbursements fail to meet the Patient Protection and Affordable Care Act’s minimum benefit and annual dollar-cap requirements for health insurance plans offered by employers. Employers who continue to offer HRAs would be subject to a $100 per day per employee penalty, or a total of $36,500 during a one-year period. Enforcement of the guidance and penalties was delayed until July 1 this year.
Under the proposed legislation, small businesses and local municipalities with fewer than 50 employees would be able to continue using pre-tax dollars to give employees a defined contribution for health care expenses. Employees also could use HRA funds to purchase health coverage on the individual market, as well as for qualified out-of-pocket medical expenses if the employee has qualified health coverage. The bill also would protect employers from being financially penalized for providing this option.
Sen. Heidi Heitkamp (D-N.D.) and Reps. Charles W. Boustany Jr. (R-La.) and Mike Thompson (D-Calif.) also sponsored the bill. The U.S. Chamber of Commerce and numerous other national business associations support the legislation.