The bipartisan passage of the 21st Century Cures Act on Dec. 13, 2016, supports swift approval of new drugs and medical devices by the FDA, increased government funding for mental illness and drug abuse aid, and medical research for diseases such as cancer and Alzheimer’s.
However, there’s one provision to the law — the Small Business Healthcare Relief Act (SBHRA) — that received little attention, but could have a major impact on small employers and the way they offer health benefits to employees in the future.
Employees at small businesses often don’t benefit from group coverage like their counterparts at larger companies. According to the Agency for Healthcare Research and Quality, 71% of small business employees are without group coverage. This translates to 33 million Americans working in the private sector for a business with 49 or fewer full-time employees.
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The SBHRA offers a host of benefits, with the most important being the ability for employers to offer tax-deductible health reimbursement arrangements to employees to help cover the cost of medical expenses, including health insurance premiums on the individual market. HRAs could provide a valuable way to address the enormous market of those without group coverage. However, wading through complexities of the law and how to make HRAs work can be tricky — and that’s where brokers come in.
You can help educate clients about the new law and explain how both employers and their employees can maximize the benefits. Here are the top seven things you need to know about the SBHRA:
1) Employers can reimburse employees for the purchase of individual health insurance if they have fewer than 50 full-time employees and don’t provide group health insurance.
2) An HRA can reimburse eligible healthcare expenses, including individual health insurance premiums and other out-of-pocket costs.
3) Reimbursements are tax-free to employees so long as the employee has minimum essential coverage.
4) The annual HRA benefit is capped at $4,950 for individuals or $10,000 for families.
5) Employers can vary their contribution based on the age of the employee and whether the employee is enrolling in single or family coverage.
6) Employees may be eligible to take advantage of their employer subsidy, as well as subsidies offered by the federal government under the ACA.
7) Employer must plan early, as there are disclosure requirements prior to their plan year.
While the future of healthcare under a new administration is uncertain, the SBHRA provides opportunities small employers can take advantage of now to seek out better and more affordable health benefits. Understanding the law’s impact and creating solutions that include both group and individual options is critical for brokers and insurers to retain existing small business clients, as well as for those trying to tap into the 33 million Americans working for companies with less than 50 employees.
With these new laws on the books, brokers who want to successfully grow their portfolio will be those that help employers maximize the dollars they spend toward employee healthcare, while minimizing the complexity of administering benefits. The 21st Century Cures Act creates opportunities for both.
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