Congress Reinstates Health Reimbursement Arrangements

In a major victory for home building firms and other small businesses across the land, the Senate today passed the 21st Century Cures Act, a comprehensive health care package which includes a provision to allow employers to provide Health Reimbursement Arrangements to help their employees pay for health insurance.

The House approved the bill last week and President Obama is expected to sign the measure into law shortly.

“National Association of Home Builders has been spearheading efforts to reinstate the use of Health Reimbursement Arrangements since the IRS issued guidance prohibiting their use,” said National Association of Home Builders Chairman Ed Brady. “This bipartisan legislation is an important step forward to allow small business owners to help their workers with rising health care costs and to ensure more Americans receive affordable health coverage. At the same time, it will protect employers against outrageous fines for providing this cost-sharing option to their workers.”

Health Reimbursement Arrangements allow small businesses to offer pre-tax dollars to insured employees to help pay premiums and/or other out-of-pocket costs associated with medical care and services. Most small companies do not have human resource departments or benefits specialists. Health Reimbursement Arrangements offer these businesses a simpler, easier way to help their employees to obtain health coverage.

The Internal Revenue Service issued guidance in 2013 stating that employers are no longer able to use Health Reimbursement Arrangements because they don’t meet the requirements of the Affordable Care Act.

Not only did the IRS make Health Reimbursement Arrangements illegal, the agency decreed that all employers can face fines of $100 per day per employee if they offer this benefit to their workers. That can add up to $36,500 per employee over the course of a year and up to $500,000 per company. This $100 per day penalty went into effect on July 1, 2015.

National Association of Home Builders has led the charge working independently and with a coalition of other business organizations to remedy this injustice by calling on the IRS to revoke its ruling on the use of Health Reimbursement Arrangements and pushing for a congressional solution.

At National Association of Home Builders’ urging, a section was added to the 21st Century Cures Act that would reinstate the use of Health Reimbursement Arrangements and rescind the punitive IRS penalties associated with them.

“National Association of Home Builders commends Congress for bringing choice and affordability to the health care marketplace by allowing small employers to once again use Health Reimbursement Arrangements,” said Brady.