New Law Permitting Health Reimbursement Plans in some Small Employer Situations
As we have previously reported, the regulators take the position that, since the effective date of the ACA, employer plans that reimburse employees for individual health policy premiums and/or for medical expenses (or that pay those premiums and/or expenses directly) are unlawful, unless those reimbursement/payment arrangements are “bundled” with an underlying health plan that meets all of the relevant ACA requirements (or that cover “no more than one” active non-highly compensated employee).
Earlier this month, the Congress enacted and the President signed legislation creating an exception to this regulatory position for a new type of vehicle called a “Qualified Small Employer Health Reimbursement Arrangement.”
In very general terms, these are reimbursement/payment arrangements maintained by “small employers” as defined under the ACA (those with fewer than 50 thirty-hour employees, as defined and as determined on a controlled group/affiliated service group/predecessor-successor employer basis) that do not maintain health plans for their employees, and that limit annual benefits to $4,950 for employee-only coverage and $10,000 for coverage for an employee and one or more family members.
Importantly, the new law contains broad eligibility and nondiscrimination requirements, contains yet-to-be-refined substantiation requirements, and requires that all costs of the QSEHRA be employer-paid (and not paid from employee contributions).
Eligible employers may establish QSEHRAs as soon as January 1, 2017, so long as they meet certain notice, reporting and other rules specified in the new law.
(The new law contains arguably overly-complex rules concerning the tax and related impact of QSEHRA coverage on employees.)
Please contact us if you have questions about this new law or if we can assist in the establishment of a QSEHRA for your employees.