Selecting the right health care benefits for your company is no small feat. There are a slew of factors to consider like hiring a broker, which benefit options employees would value most, as well as a mountain of rules and regulations. In this episode, Lauren Fifield outlines a roadmap to help employers select the right benefit options for their small business. Jennifer Pierotti Lim also joins us to discuss what’s happening on Capitol Hill that might give small business owners more flexibility. From SHOP to HRAs, tune in to learn more.
Benefits Operations & Advising, Gusto
Director of Health Policy, U.S. Chamber of Commerce
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On the Tax Front, Small Businesses Could Face Surprise Fines
In 2013, the Internal Revenue Service issued a new rule stating that all businesses providing pre-tax dollars to employees through an HRA, but not also offering a group health plan, will be fined $100 per day, per employee. Over the course of a year, that’s$36,500 per employee and up to $500,000 total. The Small Business Healthcare Relief Act could change that. Read more.
01:42 Trula Tener: Got it. So, what are the trends that you're seeing in employer-sponsored healthcare? And what should we know about?
01:50 Lauren Fifield: Sure. Well, I think in the US, benefits, health insurance have always mattered quite a bit. But, I think there are some key things that have happened over the past decade that makes benefits more important now than ever. First and foremost, no surprise to anyone, but, just generally, healthcare cost, prescription drugs, healthcare treatments, hospital stays, the cost of those have continued to rise. And so having a good health insurance plan, having that coverage as a backstop against accidents and illnesses, it's quite important. But I think one of the things that I found in doing some recent research is that, not only is just health insurance generally important, but health insurance through employers is quite important. A 2014 study by the Commonwealth Fund of New York University found that 57% of Americans have health insurance through an employer. So, I was pretty surprised by that. That's a significant percentage of the population that's receiving insurance through employers, and, of course, that means that large businesses are providing coverage but it also means that a lot of small businesses out there are the providers of this important coverage.
25:41 Trula Tener: Businesses used to be able to offer HRAs before, right?
25:44 Jennifer Pierotti Lim: Yes. So, historically, HRAs have been a great option for employers, particularly small businesses, who wanted to help their employees pay for health expenses with tax-free dollars. However, in 2013, because of the new definition of group health plan under the ACA or ObamaCare, the IRS issued regulations saying that, "All businesses providing an HRA for their workers, but not also offering a group health plan with that HRA, will be subject to penalties." Again, that's $100 per day, per employee, fine. Over the course of the year, that's $36,500 per employee and up to $500,000 in total. This penalty went into effect just last year on July 1st. As a result, employers no longer have the flexibility they've historically had to provide these HRAs to their employees without also offering a group health plan. So, a lot of small businesses who couldn't afford or didn't have the man power to offer full group health coverage thought these health reimbursement arrangements were a great option to not only offer something to their employees but also not break the bank.