Mar 31, 2015

Is Obamacare Keeping Small Business From Reimbursing Workers' Private Health Insurance Costs?

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Last week, we came across a question: Is Obamacare keeping small business from reimbursing workers' private health insurance costs? The cases of small businesses and the burdens placed on them by the Affordable Care Act are constantly in the news. Compliance with health care law is costing businesses lots of money and resources. On average, complying with the law costs small businesses more than $15,000 a year, according to a survey released a year ago by the National Small Business Association.

Responding to a question from Iowa Sen. Chuck Grassley, a representative of a major association for small businesses confirmed that a number of small businesses continue to be unaware that they are no longer permitted under the President's health care law to provide a benefit to their employees that many have provided for years­ -- reimbursing their employees for the cost of health insurance purchased on the individual market.

"According to the National Federation of Independent Business, around 18 percent of small businesses last year reimbursed employees or provided other financial support to workers who bought individual insurance plans," Grassley said. "Such health reimbursement arrangements are prohibited by the President's health care law, and the IRS will begin imposing penalties against small businesses with health reimbursement arrangements in July."

Small businesses that fail to recognize this could face as much as a $100 per day per employee penalty simply because they want to help their employee obtain health coverage, Grassley said at a Finance Committee hearing late last week "This fails to meet the common sense test."

Holly Wade, Director of Research and Policy Analysis, National Federation of Independent Business, said that many employers who have offered or have been considering the benefit are confused by the complicated nature of the new policies.

Grassley said he is working on legislation to permit small businesses to continue to reimburse their employees for health insurance premiums on a pre-tax basis. (Material from here used for this section)

Here's what you need to know: 

The Department of Labor states than if an employer offers its employees post-tax (or pre-tax) money and told them they could use the money only to buy health insurance in the individual market or the exchange, then DOL says that the employer has established a welfare benefit plan covered by ERISA.

Small employers don’t have to set up a plan, but if they do, the plan has to be ACA compliant. This means in the small group market that the coverage has to include the 10 essential health care benefits.  If a small employer offers coverage that is not ACA compliant, it is subject to a $100 a day penalty.  Therefore, an employer offering money to its employees to go buy coverage has established a plan that is NOT ACA compliant. Here's where we see the current problem with stand-alone Health Reimnbursement Accounts. The DOL has said that they are not ACA compliant because standing alone they are not tied directly a plan that contains the minimum essential benefits.

At AWANE, we offer plans in full compliance with the ACA, and our team works hard to keep your administrative costs to a minimum. From our own private health insurance exchange, to best in class service, we keep our Members ahead of the curve. Please contact us today to join our Trade Association and keep your small business compliant, efficient, and protected from the uncertainty in the marketplace.