A new law, along with rules governing Health Reimbursement Arrangements (HRA) affects the type of health care benefits you can offer your employees. HRAs are employer-funded, tax-advantaged employer health benefit plans that help employees pay for out-of-pocket medical expenses and health insurancepremiums.Small Business HRA/QSEHRAA new law created a Small Business, also known as a Qualified Small Employer (QSEHRA), provides a way for small businesses that don’t offer group health plans to fund HRAs for employees who purchase individual health insurance plans.
The HRA provision is part of the 21st Century Cures Act, signed into law by President Barak Obama in December 2016. The law primarily focuses on accelerating drug approvals and making innovative treatments more accessible. The law also overturns Internal Revenue Service and Department of Labor regulations penalizing small employers who provide HRA benefits. Employers with fewer than 50 full-time employees or equivalents can now fund employee HRAs if they don’t offer health coverage.
If an employer decides to offer a QSEHRA, it must offer them to all qualifying full-time employees. Exceptions are part-time or seasonal workers; employees who have not completed90 days of service; employees who are younger than 25; or employees who are covered under a collective bargaining agreement for accident and health benefits. Employers currently are limited to offering$4,950 HRAs for single coverage and$10,000 HRAs for family coverage. Contributions to the accounts should generally be equal, although there is some room for variance based on the price of an individual health insurance policy and factors such as the age of the employee, number of eligible family members, and other factors. Amounts are pro-rated for partial year coverage and indexed in future years.
Chatrane Birbal, senior advisor for government relations at the Society for Human Resource Management, applauds the new law. “This change provides small employers greater flexibility in terms of benefit offerings and allows eligible employers to use HRA, help employees purchase an affordable health insurance plan that fits their individual budget and health care needs,” Birbal said. The timing of the law, however, made it too late for many employers to take advantage of the provision in 2017. Employers are being urged to start planning now to take advantage of this option for 2018.