Health insurance brokers are hoping the next administration will give them help with offering the new small-group cash-for-coverage plans to employers in 2017.
President Obama created the new breed of cash-for-coverage plans, or qualified small employer health reimbursement arrangements, Tuesday, by signing H.R. 34, the 21st Century Cures Act bill, into law.
Major sections of the new act provide funding for research to fight conditions such as cancer and Alzheimer’s disease.
One section of the act, Section 18001, will let small employers use the Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) to provide up to $4,950 in reimbursement for individual major medical premiums for 2017, and up to $10,000 in reimbursement for family coverage premiums.
Any employer that qualifies as a small employer for Affordable Care Act employer coverage mandate purposes can use the provision.
The provision is supposed to take effect for plan years starting after Dec. 31.
The QSEHRAs are comparable to another arrangement, the major medical insurance premium-only plan, that was in use before the Affordable Care Act came along.
In the past, some employers used plans created under Section 125 of the Internal Revenue Code to give employees cash to pay individual health insurance premiums.
In November 2008, for example, a benefits administrator said it had set up a Section 125 premium-only plan (POP) for Obama for America, an umbrella organization for state Democratic campaign organizations.
Starting in 2010, the ACA began to phase in a ban on major medical plans imposing lifetime or annual benefits limits on coverage for basic medical services, or “essential health benefits.” The Obama administration argued that ban on annual benefits limits would make using a stand-alone HRA or similar arrangement to pay individual major medical insurance premiums impractical, because the stand-alone HRA itself would be a major medical plan that would have to provide unlimited coverage for essential health benefits.
The Obama administration put off enforcing that interpretation of the rules, but most premium-only plan marketers have been offering the POP as a vehicle for paying for dental insurance, vision insurance and other products that fall outside the scope of the ACA major medical insurance rules, not as a vehicle for paying for individual major medical insurance premiums.
Zane Benefits Inc., a Salt Lake City-based benefits firm, has started PeopleKeep, a program that will help employers offer QSEHRAs to their employers.
Adam Berkowitz, a St. Louis-based benefits consultant, writes in a comment on the new QSEHRA provision that one barrier to selling QSEHRAs is that small employers need not worry about paying Affordable Care Act mandate penalties, no matter what kind of health benefits they do or do not offer.
Another obstacle is that, under the current individual health market rules, consumers normally must sign up for individual major medical coverage by Jan. 31. Consumers need to qualify for a special enrollment period to buy individual coverage at other times of the year.
Because of the open enrollment period system, it’s not clear whether a new employee who came aboard in the middle of the year could actually use a QSEHRA to get individual coverage, Berkowitz writes.
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