Ensuring The Healthcare System Works For All

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Ensuring The Healthcare System Works For All

Jul 28, 2015
The United States Supreme Court’s recent, historic decision in King v. Burwell, upholding the right of federal premium assistance, guaranteed millions of Americans the right to keep their healthcare. Last month’s ruling, along with the previous 2012 Supreme Court decision affirming the constitutionality of the Affordable Care Act, was a profound victory for the ideal that healthcare should be a right of all Americans – rich or poor, individual or small business owner. These decisions by the U.S. Supreme Court mark the existence – and importance -- of the nation’s new healthcare system by keeping the law in tact and establishing a precedent for future debates regarding healthcare in America.   

As the high court was protecting lifesaving financial support for healthcare coverage, the Internal Revenue Service was preparing a long awaited attack on an obscure part of the healthcare system.  Less than one week after the Supreme Court’s recent decision, the IRS began enforcing a policy imposing a $100 a day fine per employee on small businesses that offer traditional Health Reimbursement Accounts (HRAs) – a devastating blow to the small business community.


As an unintended consequence of the ACA, HRAs were outlawed for the majority of the small business community with 49 or less employees who did not fall under the employer mandate and did not meet the law’s “Essential Health Benefit” requirements.  This eliminated the use of this traditional, often utilized healthcare tool for millions of small businesses, including the self-employed and micro-businesses.  Creating an unequal healthcare system, only “small businesses” with 50 or more employees that met that ACA’s rules could continue to also offer HRAs.
There was an immediate outcry by millions of small businesses across the country arguing that this discriminatory policy directly targeted the heart and soul of American ingenuity and entrepreneurship.  The new IRS policy, which took effect July 1, strikes at the core of the original intent of our nation’s new law – a law designed to expand healthcare options and opportunities for all Americans, not eliminate and limit vital healthcare resources for an essential segment of the American population.

HRAs have historically been a very powerful and effective tool for the small business community to do right by their employees by helping them pay for crucial healthcare needs. Under these arrangements, small employers who did not offer a group plan could offer some form of financial assistance to their employees for qualified healthcare expenses, such as co-pays, prescription drugs, and deductibles.  Part-time and seasonal employees have often relied on HRAs for vital healthcare support. Furthermore, HRAs are a fair and impartial; you must offer the same amount to each employee who has an HRA account.

This could not be anymore critical for the millions of sole proprietors and small business owners that fall outside the employer mandate. Despite being a part of the largest small business sector, they are treated as individuals and must obtain coverage on the individual exchange. Without the threshold of 50 employees to be considered for the small business exchange, they do not meet all of the law’s requirements. For instance, the baker or the graphic designer who cannot afford a full group plan, but still want to help their employees with some financial assistance for healthcare needs with HRAs could now face the threat of IRS penalties that some estimate could cost small business owners over $30,000 per year! 

That’s why in February of this year when the Treasury Department announced a delay in the enforcement of this rule many small business owners breathed a sigh of relief.  Scores of small businesses cheered they would not be unfairly penalized for simply offering an important healthcare resource to their employees. This delay allowed for the legislative process to begin addressing this situation.  A group of legislators in both the House and Senate have begun work on a bipartisan solution to fix this glitch in the implementation of the nation’s healthcare system. The Small Business Healthcare Relief Act would allow small business to continue to use HRAs without penalty or fine. As Senator Grassley (R-Iowa), one of the authors of the bipartisan legislative fix, said of the new IRS policy, it “fails to meet the common sense test.” 

Now is the time to let the legislative process work and to delay this potentially dangerous rule until the end of the year.  As most experts on this issue have said since guidance on this rule was released in 2013, this new policy hiccup misinterprets the intent of the Affordable Care Act.  As the Supreme Court has reasserted, our new healthcare system is the law of the land.  As we look to the future, let’s make sure we are doing the fair and right thing to ensure that healthcare works for everyone.

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Courtesy of NASE.org