New Act Permits Stand-Alone Health Reimbursement Accounts for Small Employers

Beginning on January 1, 2017, under the 21^st 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.

Attorney Loren L. Speziale regularly provides counsel to employers large and small on employment law matters including policies, contracts, investigations, and more.