While the ultimate fate of the ACA remains uncertain at best, employers may soon be able to use a key compliance strategy that was recently taken away from them.
Both Congress and the Senate just passed the 21st Century Cures Act (H.R. 34), a complex piece of legislation that, among other things, allows some small employers to maintain general purpose stand-alone HRAs without violating the ACA.
President Obama is expected to sign the legislation into law, and the new rules would apply to plan years beginning after Dec. 31, 2016.
Overrides IRS stance
If you recall, the IRS took a hard-line stance against stand-alone HRAs. In an FAQ, the agency clarified that if firms set up a plan that contributes un-taxed money to employees to help them pay for insurance premiums (i.e., a stand-alone HRA), it violates the health reform law.
Reason: Providing employees with a pre-determined dollar amount in an HRA that they can apply toward the purchase of health coverage on the individual health insurance market will violate the healthcare reform law’s ban on lifetime and annual dollar limits on coverage.
And the IRS warned firms it could slap them with a $100 per day, per employee fine for setting up such a plan.
End result: a potential $36,500 annual per-employee fine.
However,the new bill passed by Congress would essentially override the IRS’ stance on stand-alone HRAs for qualified small businesses.
To be a qualified small employer HRA under the bill, the HRA must be provided on the same terms to all eligible employees. However, the act does allow benefits under the HRA to vary based on age and family-size variations in the insurance policy in the relevant individual health insurance market.
The long, complex bill also includes provisions geared toward improving the Mental Health Parity Act — such as mandatory audits of plans and insurers that have violated the Mental Health Parity Act at least five times — and clarifying the use of protected health information (PHI) under HIPAA.