The Small Business Healthcare Relief Act, or SBHRA, is a bipartisan plan which will allow small businesses to utilize Health Reimbursement Arrangements (HRA) to help their workers with out of pocket costs for healthcare and insurance. It was first proposed in June of 2015 and has numerous co-sponsors in the Senate and House. Below are some additional details regarding this plan:
How Does The HRA Work?
The HRA is a system which is completely funded by the employer, and is responsible for reimbursing an employee for the cost of their medical care. This includes components such as deductibles, premiums and various other medical costs. The HRA’s value is dictated via the employer, and as with other premiums that are covered by employers HRA reimbursements are free from taxation as a result of IRC section 105.
HRAs come in two varieties, which are standalone HRAs and integrated HRAs. With integrated HRAs, the employee who receives contributions from their employer has to be enrolled in a group healthcare plan that is offered either by their employer or that of their spouse. In contrast, standalone HRAs are not associated with any coverage offer and can be utilized for the reimbursement of medical expenses which are allowable, even if the employee is already enrolled within a medical insurance plan.
How Is the SBHRA In Compliance With The IRS?
The SBHRA complies with the IRS in three different ways. First, it eliminates the designation of HRA as a group health plan for employers that have less than fifty workers. This means that it does not fall under the employer mandate, which helps employers avoid the excise tax. Second, it upholds the IRS’s demand that employees must keep health insurance as a precondition for utilizing the HRA. The SBHRA also continues the restriction of not allowing employees to use premium tax credits with HRA simultaneously.
The third way the SBHRA complies with the IRS is that it gives HRAs the ability to reimburse workers who buy health insurance through the individual market, as well as reimbursing out of pocket costs which are covered under IRC sec. 213 d, should the employee be enrolled within a health plan that is qualified.
Who Is Allowed To Use The HRA Accounts?
HRAs may only be provided by employers that have less than fifty workers, which mean they don’t fall under the employer mandate. The Affordable Care Act stipulates that businesses which have less than fifty workers are not required to give medical coverage.
However, some of these employers were already providing coverage and would like to continue doing so. Regarding employees, the bill would allow them to use HRAs only under circumstances where they already have coverage through a health plan that is qualified, which would include Medicare.
Statistics show that only about 32 percent of employers in the U.S. with less than fifty workers offer medical coverage. The ACA instituted the Small Business Health Options Program (SHOP) to offer a market for employers to purchase affordable medical coverage for their workers.