December 16, 2016

New Law Expands Small Employer Health Insurance Options

[vc_row][vc_column width=”1/2″][vc_column_text]With the passage of the 21st Century Cures Act (the “Cures Act”) many employers will be able to re-implement the use of health insurance reimbursement arrangements similar to employer payment plans.  An employer payment plan allows an employer to reimburse employees the cost of health insurance obtained directly by the employees in lieu of offering a group health plan.  This was a common benefit offered by many small business owners who wanted to contribute funds toward their employees’ health insurance costs as an alternative to the employer offering health insurance directly to its employees.  As part of the Affordable Care Act (also commonly known as Obamacare), the use of employer payment plans became a prohibited practice for which violations carried severe penalties equal to $100 per day per individual violation—up to $36,500 per employee per year.  The prohibition generally applied to all employers regardless of size and regardless of for-profit or nonprofit status.  Consequently, many employers were forced to cease offering employer payment plans as a benefit to their employees, and (for cost reasons) were not able to offer their employees any substituting benefit.

The Cures Act provides that arrangements similar to employer payment plans are once again permitted and can be arranged to avoid the harsh penalties under the Affordable Care Act.[/vc_column_text][/vc_column][vc_column width=”1/2″][vc_single_image image=”1446″ img_size=”full” alignment=”center”][info_box title=”Glenn E. Lovett”]Phone: 850-432-0759
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[/info_box][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]With the exception of some new requirements, most employers will be able to offer plans (now referred to as “Qualified Small Employer Health Reimbursement Arrangements”) comparable to the employer payment plans in common practice prior to passage of the Affordable Care Act.

To establish a compliant Qualified Small Employer Health Reimbursement Arrangement under the Cures Act, the employer must structure the plan in accordance with Section 18001 of the Cures Act, which includes among other things, three notable requirements:

  1. The employer must NOT be a “large employer” under the Affordable Care Act—meaning, the employer (directly, or in aggregate with related entities) has fewer than fifty full-time equivalent employees;
  2. The employer must NOT offer a group health plan to its employees; and
  3. The annual benefit to the employee cannot exceed $4,950 for individuals or up to $10,000 if the individual’s family members are included.

 For many employers, the arrangement provides a win-win solution for both the employer and the employees.  The employer is able to mitigate the costs of a benefit offered to its employees, and the employer will likely also be able to deduct the costs in accordance with the long-standing IRS Revenue Ruling 61-146.  The employee, in turn, is able to shop for a customized plan that better suits his or her needs than if the employer offered a group health plan.

Employers desiring to implement a Qualified Small Employer Health Reimbursement Arrangement should consult with an attorney to ensure the arrangement complies with the Cures Act.  Failure to establish a compliant arrangement while offering a plan comparable to an employer payment plan will subject the employer to severe penalties under the Affordable Care Act.  Additionally, employers currently offering health benefits to employees should consult with an attorney prior to making any changes to those benefits.


[/vc_column_text][vc_separator color=”peacoc”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]Glenn E. Lovett is an attorney in Clark Partington’s transaction department in the Pensacola office. His practice areas include corporate transactional matters, with a focus on mergers and acquisitions, corporate formation and governance, and contract review, and also health law matters, with a focus on providing guidance on the Health Insurance Portability and Accountability Act (HIPAA), the Patient Protection and Affordable Care Act (ACA), the “Stark” law, the “Anti-kickback” statute, Medicare, Medicaid, and relevant portions of the federal and state False Claims Acts.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_separator color=”peacoc”][/vc_column][/vc_row][vc_row][vc_column][vc_column_text]

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