Who: Small groups and employees working for groups with fewer than 50 full-time or full-time equivalent employees (part-time and seasonal employees can be excluded).
When: The 21st Century Cures Act passed Congress on December 7, 2016 and signed into law on December 13, 2016 with an effective date of January 1, 2017 (plan years beginning after December 31, 2016).
What: The Cures Act focuses mainly on speeding up drug approvals through the Food and Drug Administration, but as an important additional feature of the law created a new type of Health Reimbursement Arrangement called a “Qualified Small Employer Health Reimbursement Arrangement” (QSEHRA).
Executive Summary: The Cures Act overturns a previous ruling by the IRS and DOL that precluded employers from using a defined contribution “HRA only” approach to subsidize their employees’ purchase of individual plans. This new law allows employers with fewer than 50 employees to fund out-of-pocket medical expenses and/or subsidize premiums for the purchase of individual health plans with tax advantage QSEHRAs. To qualify:
- Employer must be fewer than 50 employees and full-time equivalents, and
- Don’t sponsor a group health plan.
The requirements placed on the QSEHRA are:
- Employer only funding (cannot do any salary deduction)
- Maximum annual amounts are $4,950 for single coverage, and $10,000 for family coverage.
- QSEHRA maximums are adjusted annually for inflation
- Must be offered to all full-time employees, except:
- Those not yet completed the 90 day waiting period,
- Are under age 25,
- Who are covered by a collective bargaining agreement, or
- Part-time seasonal employees.
- Notice of QSEHRA must be provided at least 90 days in advance.
If the requirements of the QSEHRA are not meet, the use of traditional HRAs are still disallowed under the ACA unless there is an attached ACA qualified health plan.
Actions: If you are a qualified employer, you now have the choice to offer a group plan or to subsidize the purchase of individual policies, both in a tax-advantaged way. Check with your agent/broker to assure you qualify and that the requirements of the QSEHRA are met. Insurers and brokers can now offer a wider range of products. The coverage mandates of the ACA still apply to the purchase of both individual and group policies. However, the Trump administration may move to eliminate current coverage mandates and ACA premium structures in favor of more options and a defined benefits approach.
The information presented and contained within this article was submitted by Ronald E. Bachman, President & CEO of Healthcare Visions and a Sr. Fellow of the Georgia Public Policy Foundation. This information is general information only, and does not, and is not intended to constitute legal advice. You should consult legal advisors to determine the laws and regulations in your state. Any opinions expressed within this document are solely the opinion of the individual author and may not reflect the opinions of the Georgia Public Policy Foundation.