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New Law Boosts Health Reimbursement Benefits for Small Businesses

by Pat Collopy on Dec 19, 2016 12:43:08 PM

The 21st Century Cares Act, signed into law by President Obama earlier this month and effective January 1, features a variety of healthcare provisions, including one that will boost the healthcare reimbursement benefits that small businesses can offer to their employees.

The new law provides exemptions for eligible small employers and allows them to fund Health Reimbursement Arrangements (HRAs) to reimburse employees for qualified out-of-pocket medical expenses and non-group plan health insurance premiums. This includes plans purchased on public health care exchanges under the Affordable Care Act (ACA).

In order for an employer to qualify for this new HRA allowance, it must have fewer than 50 full-time employees and must not be offering a group health plan. The employer must also provide the HRA on the same terms to all eligible employees with an exception for age and family-size variations in the price of an insurance policy.

The maximum reimbursement small employers can provide under the plan is $4,950 for individuals and $10,000 for families, and the provision is effective for plan years beginning after December 31, 2016. The coverage and payments under a qualified HRA are excluded from gross income, unless the employee does not have minimum essential coverage for the month in which the medical care was provided.

This provision overturns Department of Labor and IRS guidance that currently prevents some employers from funding employee HRAs because these arrangements were found to violate the Affordable Care Act insurance market reforms. The agency guidance would still prohibit these arrangements for larger employers.

We expect the new HRA allowance to be welcomed by small businesses that have wanted to help their employees purchase affordable health insurance plans.

H.R.6 – 21st Century Cures Act

Here at CPS we make sure that you stay up to date with any changes to state or federal regulations. Please reach out to with questions to ensure that your organization stays on top of benefit changes.


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