Employee retention is perhaps one of the biggest challenges many businesses face today, and often keeping your best employees is about more than just paying them well.
Many people are also looking to their employers for affordable healthcare coverage, but for small business owners the cost of offering group health insurance can be crippling.
Rather than risk losing your employees to competitors who offer benefits, many companies allow employees to go out and shop for individual insurance plans, then provide reimbursement to help cover the monthly premiums and other health care costs.
DOL Restructures Health Benefit Landscape
In September 2013, the Departments of Labor, Treasury, and Human and Health Services issued guidance to existing annual limit requirements as they pertain to stand-alone health reimbursement arrangements (HRAs).
The rule, as many interpreted it, said that if you were a small business that did not offer a group health insurance plan (which is not required under Obamacare for businesses with fewer than 50 employees), but tried to reimburse employees for their individual plans without satisfying Market Reforms, you could be fined up to $100 per day per employee for up to $36,500 a year.
Small Business Healthcare Relief Act
Groups like the National Federation of Independent Business, the National Association for the Self-Employed, and Zane Benefits have been working with Congress to pass a bipartisan fix to eliminate excessive penalties. The current legislation, entitled the Small Business Healthcare Relief Act (SBHRA), was introduced in the House by Representatives Charles Boustany (R-LA) and Mike Thompson (D-CA) and in the Senate by Sen. Charles Grassley (R-IA) and Heidi Heitkamp (D-ND). It has 10 additional co-sponsors in the Senate, and 67 in the House, and in both legislative branches the bill is currently in committees awaiting review.
While small businesses wait for Congress to reinstate the HRA, there are additional options to help employers continue to provide benefits in the most cost-effective way without incurring penalties. A Healthcare Reimbursement Plan (HRP) is specifically designed to reimburse for health insurance premiums and basic preventive services while satisfying the market reforms. It falls under Internal Revenue Code §105, and provides tax advantages to help alleviate some of the costs of individual health plans. It’s not traditional health insurance, but instead is a way for employers to make an allowance available to employees, then reimburse employees for their eligible expenses related to healthcare. The employer does not disburse any funds until employees incur approved expenses.
Using this Section 105 plan also ensures your company is in compliance with IRS, ERISA, and Affordable Care Act requirements.
Small businesses know that offering health insurance is one way to attract and retain the most talented employees, but businesses must set up their reimbursement plans the right way. While we await the passage of the SBHRA, a Section 105 Healthcare Reimbursement Plan makes it possible to provide reimbursement for individual health insurance premiums and basic preventive services while allowing employees to keep their portable, customizable coverage.
How would this new legislation change the way you offer reimbursement to your employees for individual plans? Leave a comment below.