New Bill Fixes Reimbursement Issue With Affordable Care Act

The newly passed 21st Century Cures Act will impact small businesses as it aims to correct reimbursement issues linked to the Affordable Care Act.

Small businesses will soon again be able to make tax deductible contributions to the their employees’ healthcare after Obamacare restricted the procedure.

That’s thanks to the 21st Century Cures Act, which was unanimously passed by the Senate. A small, but significant, part of the bill has to do with Healthcare Reimbursement Arrangements (HRAs). These HRAs will have a significantly positive impact on small businesses.

What are HRAs and How Will They Affect You?

An HRA allows employers to contribute towards an employee’s account who can then use it as reimbursement for out of pocket medical expenses. It’s worth noting that the contributions are tax free to the employee, but tax deductible to the employer.

It’s also important to mention here that HRAs were previously very limited by the Affordable Care Act.

The provision is now added in the Cures Act, enabling small firms to buy lower cost, higher deductible plans and offer those savings back to the employees.

“Health reimbursement arrangements got a huge win when the Small Business Healthcare Relief Act passed a House vote as part of the 21st Century Cures Act,” Lindsay Wissman wrote on the blog of employee benefit consulting firm Zane Benefits, adding it “…means that small businesses will once again be able to offer health reimbursement arrangements to their employees.”

What’s Next?

The law goes into effect for plan years starting after December 31. Significantly, it provides transition relief through that date, which means small employers with non-compliant plans will not be penalized.

Analysts expect the president to sign this bill into law before leaving office. But with Obamacare’s fate looking uncertain under the incoming Trump administration, the overall impact of the legislation in the long run will have to be seen.

Affordable Care Act Photo via Shutterstock Comment ▼

Shubhomita Bose Shubhomita Bose is a Staff Writer for Small Business Trends. She covers key studies and surveys about the small business market, along with general small business news. She draws on 8 years of experience in copywriting, marketing and communications, having worked extensively on creating content for small and medium sized enterprises.

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