The Cures Act – Small Employer Health Reimbursement Arrangement

On December 13, 2016, President Obama signed the “21st Century Cures Act” (H.R. 34). The Act provides funding for biomedical research, BRAIN (Brain Research through Advancing Innovative Neurotechnologies) and precision medicine initiatives; cancer research; modernizing clinical trial design; and for mental health parity reform.  In addition, the Act exempts small employer health reimbursement arrangements (HRAs) from the Affordable Care Act’s group plan rules.  Specifically, a small employer (an employer with less than 50 full time employees) may establish a Qualified Small Employer Health Reimbursement Arrangement (“QSEHRA”) if it does not offer group health insurance to any of its employees.  If eligible:

–          an employer must offer the QSEHRA to all employees under the same terms;

–          the QSEHRA must be funded solely by the employer;

–          the moneys must be used to pay for a qualified medical expense incurred by the employee or the employee’s family member.

The QSEHRA reimbursements are capped at $4,950 for employee only and $10,000 for other than self coverage.  The QSEHRA meets the same terms requirement even if the employee reimbursements vary due to health coverage cost in the marketplace (e.g., reimbursing self coverage vs. reimbursing family coverage).

An employer must provide notice of the availability of the QSEHRA 90 days prior to the beginning of the year or when the employee first becomes eligible.  The notice must include:
1) the reimbursement amount;
2) the employee must notify the exchange of the reimbursement amount; and
3) that failure to be covered by insurance will result in an individual penalty.

Finally, the QSEHRA is not a group health plan as defined under ERISA and thus, not subject to its requirements.

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