Chuck Grassley

United States Senator from Iowa

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Grassley, Heitkamp, Boustany, and Thompson Introduce Health Reimbursement Arrangement (HRA) Bills

Jul 07, 2015

Washington, DC – U.S. Senators Chuck Grassley (R-IA) and Heidi Heitkamp (D-ND) and Congressmen Charles W. Boustany, Jr., MD, (R-LA) and Mike Thompson (D-CA) introduced bipartisan companion language in the House (H.R. 2911) and Senate (S. 1697) known as the Small Business Healthcare Relief Act to roll back existing Treasury Department guidance issued under the authority of the Affordable Care Act prohibiting the use of Health Reimbursement Arrangements (HRAs). Boustany and Thompson introduced the legislation last Congress. 

On September 13, 2013, Treasury issued guidance disallowing employers from using stand-alone HRAs to reimburse employees for healthcare-related expenses, stating these arrangements did not satisfy the Affordable Care Act’s minimum benefit and annual dollar cap requirements for health insurance plans offered by employers. As a result, employers that continue to offer HRAs would be subject to a $100 per day per employee penalty, totaling up to $36,500 over the course of the year. After Boustany questioned Secretary Jack Lew on this issue in a Ways & Means hearing on February 3, 2015, Treasury announced on February 18 that it would delay enforcement of this guidance and resulting penalties until July 1, 2015. 

Grassley, Heitkamp, Boustany, and Thompson’s legislation restores flexibility and choice into the marketplace by:

  •     Ensuring that small businesses and local municipalities with fewer than 50 employees are allowed to continue using pre-tax dollars to give employees a defined contribution for healthcare expenses 
  •     Allowing employees to use HRA funds to purchase health coverage on the individual market, as well as for qualified out-of-pocket medical expenses if the employee has qualified health coverage
  •     Protecting employers from being financially penalized for providing this cost-sharing option to employees

Grassley said: “I’ve heard from farmers, small business owners and accountants who are worried about getting hit with a penalty for something they’ve done for a long time without any controversy. It doesn’t make sense to tell small employers they can’t help their employees get health insurance. Why disrupt something that worked? Our bill puts this provision back to what it was so farmers and small businesses can use this option as they see fit.” 

Heitkamp said: “Our bipartisan bill would make a needed fix to restore the ability for small businesses, which sometimes can’t afford to provide health benefits‎ for employees, to help their workers purchase coverage using HRAs. That just makes sense. I have long said some parts of the health care reform law work, but we need to improve the pieces that should work better for families and small businesses - and this bill continues those efforts.”

Boustany said: “Restoring choice and affordability in the healthcare marketplace is the key to driving down costs and improving accessibility for consumers. Using Healthcare Reimbursement Arrangements is a creative approach that allows employees to select healthcare plans that are best tailored to fit their needs. Our common-sense bipartisan legislation frees employers to provide their employees with options that will put the individual in charge.” 

Thompson said: “This common-sense, bipartisan bill is about choice and affordability. It will allow small businesses to offer Healthcare Reimbursement Arrangements to their workers so they can choose a quality, affordable health insurance plan that fits their individual budget and healthcare needs.” 

Bruce Josten, Executive Vice President for Government Affairs at the U.S. Chamber of Commerce, said: “The U.S. Chamber has long supported flexibility in benefit offerings, including the ability to offer stand-alone HRAs to help employees pay for health care coverage and services. This bipartisan, bicameral legislation marks an important first step in returning flexibility and choice to all businesses and their employees, and if enacted, would restore appropriate common-sense options to small business and their employees.”  

Tom Woods, Chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, MO, said: “This common-sense legislation is particularly important for small businesses with fewer than 50 employees. Even though these employers cannot offer a health insurance plan due to prohibitive costs, they would still be able to help make healthcare more affordable for their workers. We urge Congress to swiftly pass this bipartisan legislation so that more employers can help their workers meet the high cost of medical premiums or out-of-pocket expenses.”

Kevin Kuhlman, Director of Legislative Affairs for the National Federation of Independence Business (NFIB), said: “If there’s an opportunity for a bipartisan improvement toward affordable healthcare, this has to be it. There’s no real justification for penalizing small businesses that do what the law’s strongest supporters claim to want, which is to help employees obtain coverage or pay medical bills.  This is a rigid and thoughtless bureaucratic rule that undermines the purpose of the law, and it ought to be repealed immediately.”

Bob Stallman, President of the American Farm Bureau Federation (AFBF), said: “Farmers regularly take on the roles of CEO, CFO, and HR director, in addition to caring for their land and animals. This legislation would give farm and ranch businesses, which are largely family-run, the flexibility they need to offer health care benefits in a way that makes the most sense for their employees and their businesses.”

Katie Vlietstra Wonnenberg, Vice President of Government Relations & Public Affairs for the National Association for the Self-Employed (NASE) said: “We applaud the introduction of the Small Business Healthcare Relief Act, bipartisan, bicameral legislation championed by Reps. Charles Boustany (R-La.) and Mike Thompson (D-Calif.) and Sens. Charles Grassley (R-Iowa) and Heidi Heitkamp (D-N.D.), as a common-sense solution to ensuring America's smallest businesses with fewer than 50 employees have access to Health Reimbursement Arrangements (HRAs).”

Joel White, President of the Council for Affordable Health Coverage (CAHC), a multi-stakeholder advocacy alliance, said: “The IRS has issued a rule that penalizes small employers for doing the right thing - providing help to employees. Employers are struggling with how to maintain employee health benefits in the current costly, burdensome, and uncertain environment. This legislation takes a good first step in addressing the negative consequences of the rule.  Employers shouldn't be penalized for helping employees better afford their coverage. Congress needs to pass this bill as quickly as possible.”

Chris Byrd, Executive Vice President of healthcare software and payment solutions company Evolution1, a WEX company, said: “We are delighted bipartisan legislation has been introduced to permit small businesses to assist their employees with health insurance and out-of-pocket costs without being subject to egregious penalties of $36,500 per employee.” 

Supporters of the legislation include the U.S. Chamber of Commerce, the National Association for Towns and Townships, the American Farm Bureau Federation (AFBF), the National Association of Manufacturers (NAM), the National Association of Home Builders (NAHB), the National Federation of Business (NFIB), the Small Business Majority, the National Association for the Self Employed (NASE), the Coalition for Affordable Health Coverage (CAHC), the Retail Industry Leaders Association (RILA), and the National Retail Federation (NRF).

A one-page summary of the legislation introduced by Grassley, Heitkamp, Boustany, and Thompson and an issue backgrounder for the legislation are available here and here.

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