A small part of a new congressional healthcare bill may have a big effect on your business
(This post originally appeared on The Washington Post)
On Wednesday the Senate overwhelmingly approved the 21st Century Cures Act. It’s a broad bill that, as reported by U.S. News & World Report, will speed up the review and approval process for drugs and medical devices by the Food and Drug Administration. The bill will also provide funding for Vice President Biden’s “Cancer Moonshot” initiative and Alzheimer’s research.
But there’s a small part of this bill that’s getting much less attention by the media. t has to do with Healthcare Reimbursement Arrangements (HRAs) and it could have a huge positive impact for many small businesses.
An HRA allows employers to contribute money (up to $4,950 for individuals and $10,000 for families) to an employee’s account who can then use that money as reimbursement for out of pocket medical expenses. The contributions are tax free to the employee yet tax deductible to the employer. Previously, HRAs were very limited by the Affordable Care Act.
This provision is now included in the Cures Act. It was previously part of another bill making its way through Congress called the Small Business Relief Act.
“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.”
How does this affect your business? Now you can offer high deductible plans to your employees but help them out with their out of pocket expenses with tax deductible contributions to their HRA accounts. That way you can purchase lower cost, higher deductible plans and give those savings back to your employees. If done correctly, both employee and employer can win. More importantly, it’s another way to be competitive when recruiting new employees and retaining your current staff.
Analysts expect the president to sign the bill into law before he leaves office.