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Life Health > Health Insurance

GOP: Let small employers pay for individual health coverage

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Republicans seemed to have the wrong public official on the stand Wednesday during a hearing organized by the Senate Small Business and Entrepreneurship Committee.

Committee leaders organized the hearing to talk about the effects of the Patient Protection and Affordable Care Act (PPACA) commercial health insurance provisions on small businesses.

Republican senators, and Republican witnesses from the business world, focused on supporting S. 1697, the Small Business Healthcare Relief Act bill. The bill would let small employers reimburse employees for health insurance premium costs.

Federal regulations now keep small employers from using health reimbursement arrangements (HRAs), cafeteria plans or other arrangements to give employees cash they can use to pay for their own individual major medical coverage.

The only witness from the Obama administration, Richard Frank, the assistant secretary for planning and education at the U.S. Department of Health and Human Services (HHS), said HRAs and health savings accounts (HSAs) are under the purview of the U.S. Treasury Department.

“I’m not really that familiar with the details of those,” Frank said at the hearing, which was streamed live on the Web. 

PPACA does not require small employers to offer health coverage, or impose any penalties on small employers that fail to do so. Small employers can still offer HRAs and HSAs along with major medical coverage.

Federal agencies have ruled, however, that any efforts to use HRAs to pay a limited amount of cash for each employee’s health coverage would violate the PPACA ban on annual and lifetime health benefits limits.

The agencies have also ruled that cash-for-coverage arrangements must meet the PPACA requirement that all employer health plans cover a basic package of preventive services without imposing deductibles or other cost-sharing requirements on the patients.

HRA supporters say the Obama administration applied the PPACA rules to HRAs and other cash-for-coverage arrangements in that way because the administration was afraid small employers would push employees into the PPACA public exchange system.

See also: 3 ways new PPACA employer rules could hit your clients

PPACA did create a Small Business Health Options Program (SHOP) public exchange division. As of July 2015, SHOP plans were covering just 10,700 small groups, with a total of just 85,000 employees.

Kevin Kuhlman, a witness from the National Federation of Independent Business (NFIB), said 16 percent of the small businesses it surveyed in 2015 were helping employees pay individual health insurance premiums. The Internal Revenue Service has the authority to impose fines of up to $36,500 per year on those small employers, according to NFIB data.

“Certainly, lawmakers who drafted the ACA did not intend to punish small businesses in this manner,” Kuhlman testified. 

See also: 

9 FAQs about HSAs, FSAs and HRAs

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