New Act Permits Stand-Alone Health Reimbursement Accounts for Small Employers
Beginning on January 1, 2017, under the 21st Century Cures Act (“Cures Act”), enacted on December 13, 2016, small employers may offer a new type of stand-alone health reimbursement arrangement to help their employees pay for medical expenses – the “qualified small employer health reimbursement arrangement” (“QSEHRA”),including health plans purchased on the public health insurance exchanges. Such an arrangement was previously prohibited under the Affordable Care Act (“ACA”).
A QSEHRA is not considered a group health plan. Also, a QSEHRA does not have to be integrated with a group health plan sponsored by the employer in order to comply with the ACA market reforms.
As the Cures Act details, a QSEHRA may be offered by employers with less than 50 full-time and full-time equivalent employees that do not sponsor a group health plan and meet the following criteria:
- The arrangement is funded solely by the eligible employer and no salary reduction contributions are permitted.
- The arrangement is provided on the same terms to all eligible employees of the small employer subject to certain exclusions specified under the Cures Act.
- The arrangement must provide for the payment or reimbursement of an eligible employee’s medical care expenses after the eligible employee provides proof of coverage.
- The amount of payments and reimbursements available under the arrangement cannot exceed $4,950 for employee-only coverage or $10,000 for family coverage in any year. This limit will be subject to a pro-rated cap for partial year coverage and are subject to cost-of-living adjustments.
This new legislation offers eligible small employers more flexibility in benefit offerings and the opportunity to provide their employees with assistance in purchasing affordable health insurance plans.