Tucked deep within the 824-page “21st Century Cures” legislation passed this week, was a major victory for Women Impacting Public Policy and entrepreneurs nationwide. The bill, on its way to the President for his signature will allow for the return of Health Reimbursement Arrangements, or “HRAs”, a small business-friendly way to offer health benefits.

In short, HRAs offer business owners an easy and tax-friendly way to subsidize employee medical costs, including insurance premiums. For example, a business owner could offer $200 a month to employees toward their individual premiums instead of providing health insurance through a company plan.

In practice, employees shop for plans in the individual market, finding what best fits their needs and budget. The business reimburses employees for some or that entire premium. This was a popular method for small businesses for which company-wide insurance plans were prohibitively costly.

The Affordable Care Act, however, and its interpretation by the IRS created stiff penalties (up to $500,000) for businesses using this method to offer a health benefit. This legislation reverses that interpretation, making clear that such plans are acceptable, penalty free.

Employers can now offer up to $4,950 per employee per year ($10,000 for employees with dependents) and employees must show they used funds on medical purposes, including premiums. Companies must have 50 or fewer employees and must offer the benefit to all employees to be eligible.

WIPP has long advocated a fix to this unintended consequence and took the lead in pressing Health and Human Services Secretary Sylvia Burwell to provide temporary relief last year.

John Stanford, WIPP Government Relations