The 21st Century Cures Act
The 21st Century Cures ActDecember 8, 2016
Catrina Reyes, J.D., M.P.A., Policy Analyst and Compliance Manager
In a previous article, I wrote about federal guidance issued in 2013, Notice 2013-54, in which the Treasury Department and IRS, Department of Labor (DOL), and Health and Human Services (HHS) (collectively, the Departments) stated that reimbursement arrangements and employer payment plans that facilitate the pre-tax payment or reimbursement of premiums for individual medical coverage for active employees are impermissible. The Departments asserted that these arrangements generally are considered to be group health plans and are thus subject to rules applicable to group health plans. As such, they are impermissible, because they fail to comply with the market reforms that apply to group health plans under the Affordable Care Act (ACA), including the annual dollar limit prohibition and the preventive services requirement.
Congress, however, has reversed the Departments’ guidance. Congress has passed, and President Obama has signed the 21st Century Cures Act. The long and complex 900-page bill’s primary purpose is to provide funding for various medical and pharmaceutical research and development, reforms to the Food and Drug Administration, prescription opioid and heroin response, the Precision Medicine Initiative, and the cancer “moonshot” initiative spearheaded by Vice President Biden. However, the bill also has a provision that allows employers that are not “applicable large employers” (as defined in Code §4908H(c)(2)) to provide a “qualified small employer health reimbursement arrangement” if they do not offer a group health plan to any of their employees.
A “qualified small employer health reimbursement arrangement” is an arrangement that:
- is provided on the same terms to all eligible employees,
- is funded solely by an eligible employer,
- pays or reimburses an eligible employee for medical care expenses (as defined in IRS code section 213(d)), and
- pays or reimburses a maximum of $4,950 ($10,000 for family) (adjusted for inflation after 2016).
If the employee is not covered under Minimum Essential Coverage for the month in which medical care is provided, payments or reimbursements under the arrangement may be includible in gross income.
The bill specifically provides that, “the term ‘group health plan’ shall not include any qualified small employer health reimbursement arrangement.” Therefore, any “qualified small employer health reimbursement arrangement” is not subject to rules applicable to group health plans, including the annual dollar limit prohibition and the preventive services requirement. As such, small employer health reimbursement arrangements that facilitate the pre-tax payment or reimbursement of premiums for individual medical coverage for active employees are now permissible.
Future changes to health care as a result of the elections could, however, affect the implementation of this provision. Stay tuned for updates on how this legislation will be implemented.
For more information on the 21st Century Cures Act, read:
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