Health Reimbursement Arrangements - Small Businesses Owners and their Employees

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I want to give credit for this post to Laura Saunders who wrote a Wall Street Journal column this weekend entitled "Tax Change on Health Care Offers Small Firms a Salve"  She explains that "Small businesses (with less than 50 employees)  can once again use pretax funds to reimburse workers for healthcare costs, especially premiums for individual and family coverage."

Unfortunately I wasn't able to link her Wall Street Journal column (requires a subscription to WSJ ) but the same topic is discussed here by Forbes.  http://www.forbes.com/sites/ashleaebeling/2017/01/05/small-business-health-reimbursement-accounts-resurrected-for-2017/#1b3ce0fa5227 

As the Forbes columnist explains, "Stand-alone HRAs were banned under the Affordable Care Act (aka Obamacare) because they didn’t meet credible coverage rules (HRAs tied to high-deductible health plans and limited HRAs which cover retiree medical expenses or just dental and vision weren’t banned and are still viable). Employers had to freeze stand-alone HRAs and not make any more contributions to them. Crazy penalties were at stake: $100 per day per employee, or $36,500 per employee per year, up to $500,000 total. "

"Now as of Jan. 1, 2017, employers can restart stand-alone HRAs, and errant employers can rest easy because the new law lets them off the hook by offering retroactive penalty relief. The Internal Revenue Service, which first issued a notice of the ban in 2013, delayed enforcement of penalties until July 1, 2015, but started bringing it up in audits after that, says Kevin Kuhlman, NFIB government relations director. Small businesses lobbied for the law change to help employers who were caught unaware of the prohibition and those who are unable to offer group health insurance because of cost or administrative concerns but still looking for an avenue to help employees tackle healthcare costs. “

The repeal of this provision of Obamacare will help many small businesses like ours reinstate providing healthcare assistance to our employees that we previously canceled due to the IRS penalties under Obamacare.



 

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Prior to the ACA, I gave employees a choice of our company's health plan or one of their own choosing. Each year, we would reimburse them for any premiums, deductibles and co-pays. Between the cancellation of existing coverage and the rush to find replacement polices, we almost missed the need to make changes, like eliminating reimbursements for individual health plans, in order to avoid potential penalties of $100/day/employee. I am happy that in 2017, we are able to restore some benefits to our employees without the risk of substantial penalties.

Why is every business so hostile to credible coverage rules? Shouldn't they have a vested (and arguably a moral) interest in making sure that their employees have access to adequate insurance?

Edit w/ commentary: U offer me s#it low-dollar cap insurance, I'm not going to even think about working for you.

SummerSoFar said:   Why is every business so hostile to credible coverage rules? Shouln't they have a vested (an arguably a moral) interest in making sure that their employees have access to adequate insurance?
Previously, we let employees pick the type of coverage that they wanted us to pay for. Between 2014 and 2106, we were prohibited from reimbursing employees for ACA-compatible individual plans. Some states have more insurance options than others and an employee might prefer the plans in his state to the one's where he works.

Businesses with less than 50 employees aren't penalized if they don't offer insurance to their employees, so this change only affects small businesses that want to do more for their employees than the law requires.

 

SummerSoFar said:    Shouln't they have a vested (an arguably a moral) interest in making sure that their employees have access to adequate insurance?

 

  not when they can buy life insurance policies on their employees

ryeny3 said:   
SummerSoFar said:   Why is every business so hostile to credible coverage rules? Shouln't they have a vested (an arguably a moral) interest in making sure that their employees have access to adequate insurance?
Previously, we let employees pick the type of coverage that they wanted us to pay for. Between 2014 and 2106, we were prohibited from reimbursing employees for ACA-compatible individual plans. Some states have more insurance options than others and an employee might prefer the plans in his state to the one's where he works.

 
Interesting, and fair enough. And another strong argument for why all insurance needs to be de-coupled from employment. 

SummerSoFar said:   Why is every business so hostile to credible coverage rules? Shouldn't they have a vested (and arguably a moral) interest in making sure that their employees have access to adequate insurance?

 

  By that logic, why not provide an adequate transportation, acceptable housing, daycare, good schools....

  All the money that employer pays on healthcare effectively comes from employee's pockets (due to lower salary).
  Health insurance unnecessarily complicates the employee-employer price discovery.

 

ssgcinty said:   
 
  Health insurance unnecessarily complicates the employee-employer price discovery.

 

  it does allow for negotiated group discounts

ssgcinty said:   
SummerSoFar said:   Why is every business so hostile to credible coverage rules? Shouldn't they have a vested (and arguably a moral) interest in making sure that their employees have access to adequate insurance?

 

  By that logic, why not provide an adequate transportation, acceptable housing, daycare, good schools....

  All the money that employer pays on healthcare effectively comes from employee's pockets (due to lower salary).
  Health insurance unnecessarily complicates the employee-employer price discovery.

 

  
By that logic, you should probably just employ robots.

Hi deductible, catastrophic type of coverage does lead to people skipping care, due to large initial out of pocket cost.
Even prescription contact lenses require you to pay for eye exam, then the entire cost of contact lenses, until you exceed your thousands of deductible.
Know people with severe cough and eventual pneumonia skipping care due to high deductible. This person went to infect co-workers & family members.

Hi deductible, catastrophic type of coverage does lead to people skipping care, due to large initial out of pocket cost.
Even prescription contact lenses require you to pay for eye exam, then the entire cost of contact lenses, until you exceed your thousands of deductible.
Know people with severe cough and eventual pneumonia skipping care due to high deductible. This person went to infect co-workers & family members.

Seal said:   Hi deductible, catastrophic type of coverage does lead to people skipping care, due to large initial out of pocket cost.
Even prescription contact lenses require you to pay for eye exam, then the entire cost of contact lenses, until you exceed your thousands of deductible.
Know people with severe cough and eventual pneumonia skipping care due to high deductible. This person went to infect co-workers & family members.

That's what general savings and tax-advantaged health-care savings accounts are for. One should be expected to cover basic care oneself and cover catastrophes with insurance. In your example, why didn't the boss send the sick one home?

I can get an eye exam and a year's worth of contact lenses for less than $100. Or, a pair of glasses with an exam for $50. All without insurance.

It's not possible to have it both ways:  "Affordable" healthcare that covers everything will never be realized no matter how it's funded, which party proffers it or who pays for it.

This might be an unpopular response, but it is a real and honest response -

I think that many employers want to offer the best coverage at the lowest possible price... they want attract great employees and want to keep those employees.

But they are having a hard time solving the problem where health insurance costs are rising faster than wages and (most) businesses incomes. They are not able to increase the price of their products fast enough to keep in front of 25%-30%+ per year health insurance increases. And it keeps happening year after year.

The business needs more money to provide the same insurance and the same pay.

So do you (a.) Offer lower quality health coverage; (b.) Increase the amount the employee pays, and effectively reduce their paycheck; (c.) Have the business cut back on all the other non-health care / non-payroll expenses?

vadeltachi said:   
Seal said:   Know people with severe cough and eventual pneumonia skipping care due to high deductible. 
That's what general savings and tax-advantaged health-care savings accounts are for. One should be expected to cover basic care oneself and cover catastrophes with insurance. 
 

  Amen !!

slappycakes said:   This might be an unpopular response, but it is a real and honest response -

I think that many employers want to offer the best coverage at the lowest possible price... they want attract great employees and want to keep those employees.

But they are having a hard time solving the problem where health insurance costs are rising faster than wages and (most) businesses incomes. They are not able to increase the price of their products fast enough to keep in front of 25%-30%+ per year health insurance increases. And it keeps happening year after year.

The business needs more money to provide the same insurance and the same pay.

So do you (a.) Offer lower quality health coverage; (b.) Increase the amount the employee pays, and effectively reduce their paycheck; (c.) Have the business cut back on all the other non-health care / non-payroll expenses?

A very thoughtful response, yours is.  To me, the best option would be a pot of money for benefits to spend as I wished with an ability to change as needed (or at least annually). I may want more time off; more contributed toward retirement; education/tuition; a personal trainer; more robust insurance to cover a baby, sick child or a elderly parent; a car; private school tuition; legal services; company stock; Olympics sponsorship; or just the cash. Everyone's needs are unique.  As to health insurance, most working people can afford the monthly premiums without assistance until they hit mid 40s or early 50s. Then it starts getting very expensive with no relief until one hits medicare age.

Links to additional information that might be helpful for small business owners and their employees:

Dickinson - Wright:  http://www.dickinson-wright.com/news-alerts/small-employer-standalone-hra-allowed-by-new-law 

US Department of Labor:  FAQS ABOUT AFFORDABLE CARE ACT IMPLEMENTATION PART 35 - http://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-35.pdf 

The text of the Congressional Act   http://www.congress.gov/114/bills/hr34/BILLS-114hr34eah.pdf  

 



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