Legislation supporting HRAs would be a win-win
The U.S. House of Representatives recently took an important step forward to enable small business owners to help their employees with rising health-care costs and to ensure more Americans receive affordable health coverage.
With bipartisan support, the House voted to pass the Small Business Healthcare Relief Act, legislation that would enable small businesses with fewer than 50 employees to continue using Health Reimbursement Arrangements (HRAs) to help employees cover the cost of health insurance. The bill would also protect employers from being financially penalized for providing this cost-sharing option to their workers.
Companion legislation is pending in the Senate. Delaware’s home-building community commends Rep. John Carney for his work to advance the House bill, and Sens. Tom Carper and Chris Coons for supporting this measure in the Senate because it will help our state’s small business community to provide flexible and affordable health-care options to their employees and increase the number of workers who have health insurance. And that’s a win-win situation for everyone.
Until recently, homebuilding firms and other small businesses that cannot afford to provide comprehensive health coverage have routinely used HRAs to repay their workers for medical care and services. HRAs allow employers 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. HRAs have been a popular benefit with microbusinesses, which often find it challenging to obtain traditional coverage for their employees.
Indeed, HRAs are very flexible and affordable, allowing employers to design plans that fit their own unique circumstances. Moreover, since all employer contributions to the plan are fully tax deductible to the employer and worker alike, this has been a great tool to help workers to obtain health coverage.
In 2013, the IRS issued guidance stating that employers are no longer able to use HRAs because they don’t meet the requirements of the Affordable Care Act. This ruling had the unfortunate impact of dampening the ability of microbusinesses to offer any health-care assistance to their employees. Moreover, the agency decreed that all employers could 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 is outrageous. Most home-building firms and other businesses in Delaware have fewer than 50 employees and are not mandated to provide health coverage to their workers under the Affordable Care Act. Yet many of these same companies have relied on HRAs to help their employees pay for health care coverage and services.
This is why the Small Business Healthcare Relief Act is such an important issue for builders in our state. The overwhelming majority of home-building companies in Delaware and across the nation construct fewer than 10 homes annually and have less than 10 employees. Without HRAs, many of these companies are unable to help their employees with the cost of their health coverage. By reinstating the use of HRAs and protecting small business employers from being unnecessarily financially penalized for providing this option to employees, this legislation will help small business owners, workers and their families.
By supporting this legislation, Sens. Carper and Coons have demonstrated their commitment to improve affordable health care options for Delaware’s small business owners and their employees. Moreover, the legislation is budget-neutral, meaning it won’t add a single dollar to the federal deficit.
Prompt Senate approval of the Small Business Healthcare Relief Act will allow our nation’s small businesses to continue to voluntarily provide health-care assistance to their employees, enable more workers to receive health coverage, and bring choice and affordability to the marketplace.
Kevin Whittaker is president of the Home Builders Association of Delaware.