The Affordable Care Act (“the ACA”) has been operational for some time now. During its life, the ACA has been subjected to praise and criticism in addition to numerous legislative calls for repeal.
At its core, the ACA requires individuals to obtain health insurance, claim an exemption or pay a penalty. Additionally, applicable large employers (employers employing at least 50 employees) are required to provide affordable health insurance with minimal essential benefits to its employees. The pillar of the ACA has been the healthcare exchange which provides health insurance to individuals with premium subsidy support from the federal government.
Recently, there has been some good news for the ACA. This news is the result of provisions in the 21st Century Cures Act signed by President Obama on December 31, 2016. Now employers employing less than 50 employees are permitted to provide qualified health care reimbursement arrangements for its employees. These arrangements allow the employer to reimburse its employees for their personal cost of health insurance. This reimbursement is tax deductible to the employer and tax free to the employee.
These are the requirements for this qualified arrangement:
The employer must not otherwise offer a group health plan
There are some exclusions permitted, but all fulltime employees at least 25 years of age are required to be offered the plan
Only the employer can contribute to the plan
The annual limit is $4,950/single and $10,000/family
The employee must provide the employer proof that he or she obtained minimum essential coverage from a health care exchange or other third-party provider
The employer has annual notice requirements to the employee
This new legislation can go a long way in allowing smaller employers to aid its employees. As the ACA continues its journey through further legislative challenges, keep this new tool in mind as a unique and timely employee benefit.