Changes to the Affordable Care Act and the Impact to Small Business

December 20, 2016 § Leave a comment

The 2016 presidential election included much discussion of the Affordable Care Act (ACA), or Obamacare as the Act is often called. Without revisiting the entire history of the ACA, under the Act the popular employer health reimbursement plans were defined as “group health plans subject to the act’s market reform and rules.” Suddenly, employers were not allowed to reimburse employees for the cost of acquiring health insurance on the individual market. The Act also disallowed typical 105 medical reimbursement plans and 125 salary reduction plans for health insurance premiums.

Affordable Care Act.jpgDuring the election cycle, Candidate Trump vowed to repeal the ACA, and Candidate Clinton called for modifications. Now, before President-Elect Trump is inaugurated, Congress has passed and President Obama has signed the 21st Century Cures Act, which includes a provision in the “Other Provisions” section, for “Exception from group health plan requirements for qualified small employer health reimbursement arrangements.”

So what does this mean to you? With the passing of the 21st Century Cures Act, there appears to be some relief to the ACA provisions. The reimbursement arrangements described above are no longer defined as a group health plan if certain requirements are met. But before you get too excited, there are strings attached. Surprise! To qualify for the ACA exception, the plan must meet several requirements, including:

  • Eligible employer, as defined;
  • Consistent coverage offered to all eligible employees, as defined;
  • Funded 100 perfect by the employer;
  • Reimbursements based on proof of coverage; and
  • Reimbursements limited to $4,950 for the employee or $10,000 for family coverage.

Full definitions are beyond the scope of this writing, and more details will be available as the market digests this new law, which is effective after December 31, 2016.

The changes do seem positive for small employers and their employees. If you have specific questions about your situation, please contact us. We will, as always, try to keep you informed as the new law evolves.

Jim Smith, CPA
Partner – McGowen, Hurst, Clark & Smith, P.C.

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