A new option for small employers was signed into law on December 15, 2016 as part of the 21st Century Cures Act. The 21st Century Cures Act is a very broad piece of legislation intended to focus on accelerating the FDA approval process, finding a cure for cancer and improving access to mental health benefits. An interesting byproduct of the sweeping legislation involved the creation of The Qualified Small Employer Health Reimbursement Arrangement (QSEHRA). A QSEHRA allows qualifying employers to reimburse employees for eligible health care expenses, including individual health insurance premiums.
Reimbursing employees for the cost of individual health insurance premiums through a standalone health reimbursement arrangement has been prohibited since guidance was released in 2013. Beginning January 1st, “small employers,” or employers with no more than 50 full-time employees, who do not offer a group health plan, have the option of adopting a QSEHRA if they choose.
Small employers do not have to offer health coverage because they are not subject to the PPACA employer mandate, but by not doing so, many of them struggle to recruit and retain employees, affecting their ability to compete in their respective industries. The QSEHRA gives small employers a choice previously unavailable to them; and electing to reimburse individual coverage may be an attractive option for some employers currently offering group coverage. The regulations also allow for the QSEHRA to be used to pay for any qualified expense in the event the employee does not purchase a plan. The maximum amount an employer can fund is $4,950 for single coverage, or $10,000 for family coverage in 2017. These amounts must also be prorated if the employee is not covered under the plan he or she buys for the entire year.
A QSEHRA will allow many employers to provide some form of benefit - a benefit they might not have otherwise been able to offer. Additionally, a QSEHRA offers small employers an avenue to remain competitive in the talent market even if they do not offer group health coverage to their employees. This new legislation could result in more Americans securing health coverage. Please reach out to your HCW consultant for more information about QSEHRAs. Visit here for more information on QSERHA.