HRA Revisions Under 21st Century Cures Act Give Small Businesses Greater Flexibility to Provide Healthcare Benefits
Published on December 13th, 2016
President Obama signed H.R. 34, which includes a variety of healthcare provisions, including the 21st Century Cures Act and the Alegeus-supported HRA provision for eligible small employers. For HRA provision specifics, see page 824, section 18001 of the legislation.
The bill passed the House and Senate with overwhelming bipartisan support. In favor of passage, the House of Representatives voted 218-10 by Republicans and 174-6 by Democrats. On December 7th, the Senate voted 94-5 to pass the legislation. In a statement, President Obama said he intends to sign the bill as soon as possible and added that the legislation “is an example of the progress we can make when people from both parties work together to improve the health of our families, friends and neighbors.”
The provision allows for eligible small employers to offer and fund Health Reimbursement Arrangements (HRAs) for their employees. Any employer that does not offer group health insurance and has less than 50 full time employees will be eligible for the new HRA allowance. Employees of these small businesses will be able to use their employer-funded HRA dollars to pay for qualified medical expenses, including their health insurance premiums.
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.
With the 21st Century Cures Act signed into law, the HRA market will expand to include small employers that have not been able to offer an HRA since the enactment of the Affordable Care Act. This provision effectively 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 will still prohibit these arrangements for larger employers.
This is a real win across the board; a true step forward. Small businesses will have greater flexibility to provide healthcare benefits, and consumers will have a better healthcare experience. That is a tremendous benefit. Alegeus strongly supported the 21st Century Cures Act because we see the impact the changes will have on employers, consumers and the healthcare market at large.
How will Alegeus incorporate these changes into their HRA offering?
It is our job to empower you, our customers, with the agility to quickly respond to the ever-evolving market landscape. When enacted, Alegeus customers will immediately be ready to support the HRA provisions. Unlike solutions that must rely upon and integrate with third-party technologies, the Alegeus platform is a single system end-to-end, that allows us to easily accommodate new plan designs. We can apply any card payment rule to any benefit account offering.