Fed Gov’t Delays Penalties on Health Reimbursement Arrangements
IRS and the Department of Treasury on Wednesday issued guidance stating that they will delay issuing fines until July on small businesses that offer health reimbursement arrangements, the Washington Post's "On Small Business" reports.
HRAs provide employees with tax-free spending accounts that they can use to help pay for part of the cost of purchasing individual health plans. However, HRAs do not comply with the Affordable Care Act's coverage requirements, according to fall 2013 guidance issued by the Treasury Department. As a result, companies that continue to offer HRAs will be subject to penalties, issued as excise taxes, of up to $100 per day per employee (Harrison, "On Small Business," Washington Post, 2/19).
In the guidance, the departments specifically delayed enforcement of the excise taxes through June 30 (Jenks, CQ HealthBeat, 2/19) They wrote, "The departments understand that some employers that had been offering health coverage through an employer payment plan may need additional time to obtain group health coverage or adopt a suitable alternative."
In addition, they noted that the market for health plans offered through the ACA's Small Business Health Options Program "is still transitioning and the transition by eligible employers to SHOP Marketplace coverage or other alternatives will take time."
Amanda Austin, the National Federation of Independent Business' vice president of public policy, in a in a statement said, "This temporary delay serves as an important immediate step to protect small businesses from costly penalties when trying to assist employees with the purchase of health insurance. However, another delay to Obamacare does not fix the underlying problems -- which the administration is conceding with these actions."
Katie Vlietstra, vice president for government relations and public affairs at the National Association for the Self-Employed, called the delay "welcome news for our community" but added that "a long-term, legislative solution is still urgently needed." She said, "America's smallest employers need the stability of a permanent fix in order to continue to utilize this critical tool to help provide health care coverage to their employees" ("On Small Business," Washington Post, 2/19).
Similarly, Joel White -- president of the Council for Affordable Health Coverage, a group of employers and health care stakeholders, including the Pharmaceutical Research and Manufacturers of America and Aetna -- in a statement said, "HRAs have been used by employers for decades as an alternative vehicle that allows employers to provide real benefits to workers." He also called on Congress to use the "very short window" created by the delay "to enact legislation to permanently fix this problem created by the [ACA]" (Demko, Modern Healthcare, 2/19).
Boustany and Rep. Mike Thompson (D-Calif.) introduced legislation (HR 5860) in December 2014 during the previous legislative session that would have required IRS to continue to allow small businesses to offer HRAs without potential penalties. According to "On Small Business," a version of their bill is expected to be considered during the current congressional session ("On Small Business," Washington Post, 2/19).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.