21st Century Cures Act makes Health Reimbursement Arrangements (HRAs) Possible


On December 13, 2016 President Barack Obama signed the 21st Century Cures Act into law.

The bill passed with overwhelming approval in both the House and Senate. The bi-partisan legislation provides $6.3 billion to electronic health records, precision medicine, mental health and interoperability.1

This bill contains a provision regarding small business health reimbursement arrangements (“HRAs”).  (This provision is in section 18001 of the bill. The provision establishes new small employer health reimbursement arrangements so that eligible small employers can offer a health reimbursement arrangement funded solely by the employer that reimburses employees for qualified medical expenses including health insurance premiums.  The maximum reimbursement that can be provided under the plan is $4,950 or $10,000 if the plan provided for family members of the employee.  An employer is eligible to establish a small employer health reimbursement arrange if that employer (i) is not subject to the employer mandate under the Affordable Care Act (i.e., less than 50 full time employees) and (ii) does not offer a group health plan to any employees. The bill provides that employees that are covered by this health reimbursement arrangement will not be eligible for subsidies for health insurance purchased under an exchange during the months that they are covered by the employer’s health reimbursement arrangement.

For eligible small employers, this bill overturns guidance issued by the Internal Revenue Service and the Department of Labor that stated that these arrangements violated the Affordable Care Act insurance market reforms and were subject to a penalty for providing such arrangements.  The agency guidance still prohibits these arrangements for larger employers. The provision is effective for plan years beginning after December 31, 2016.  (There was transition relief for plans offering these benefits that ends December 31, 2016.)

Please find attached the bill text as enrolled.

Source: Employers Council on Flexible Compensation, 1. Healthcare Finance News  |  2016 © Copyright Payroll Masters, Photo via whitehouse.gov

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