Obamacare Repeal Has Begun for Small Firms
December 30, 2016
My previous Health Alert suggested the 21st Century Cures Act, which President Obama signed on December 13 demonstrated Republicans can lead on health reform. Promoted as a pro-innovation bill, the new law will improve the Food and Drug Administration's regulatory processes; as well as fund Vice-President Biden's Cancer Moonshot, the National Institutes of Health, and steps to reduce the opioid epidemic.
However, the final version of the bill also included an important payment reform, which takes a small but significant bite out of Obamacare. Tacked onto the end of the bill, section 18001of the 21st Century Cures Act expands the use of Health Reimbursement Arrangements (HRAs) by small businesses. This is a win for small businesses which were harmed by Obamacare. Indeed, given the overwhelming bipartisan support for the 21st Century Cures Act, section 18001 could be defined as Democrat politicians' first real step towards conceding Obamacare needs to be repealed and replaced.
The advantage of HRAs and similar funding vehicles is that they allow employers to give money directly to employees, which they can spend on medical care. This gets around health insurers' bureaucracies, which add unnecessary administrative costs. The Affordable Care Act (2010) limited employers' use of these funding vehicles.
The IRS promulgated rules levying an excise tax of up to $100 per employee per day. Although employers of fewer than 50 full-time equivalent employees were supposed to be exempt the employer mandate to offer so-called "affordable" coverage, this excise tax was effectively a penalty on small employers which had previously reimbursed employees' medical expenses or premiums using HRAs. The 21st Century Cures Act abolishes this excise tax, restoring a valuable option to small businesses' menu of benefits.
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