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A New Option for Small Company Employee Health Insurance | By: Fellow GDREIA Members

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A New Option for Small Company Employee Health Insurance
By Larry Hudson

If you run a small business with fewer than 50 employees, you now have a new way to offer health insurance to prospective hire. 
The 21st Century Cures Act, passed by Congress and signed by President Obama in December, allows companies to use Health Reimbursement Arrangements (HRAs) to pay for individual health insurance plans, according to the Journal of Accountancy, a professional journal.
Prior to the new law, HRAs were outside the requirements of the Affordable Care Act and subject to a steep excise tax.
Under the new law, which became effective January 1, qualified small businesses are able to compensate employees for their health insurance premiums the same way the companies would directly pay premiums on a group health policy. What that means is that the employees won’t owe taxes on the reimbursements and the companies won’t be on the hook for payroll taxes on the reimbursements.
The law is expected to encourage both small and medium-sized companies to replace group health insurance plans with reimbursed individual coverage, said Abir Sen, founder and C.E.O. of a company that helps businesses make the switch.
He told Forbes Magazine that the thinking that built support for the new law has been around for awhile.
“I think the macro trend for small and mid-sized companies is to say, a) we can’t afford traditional group insurance much longer, and b) we don’t like the administrative complexities of administering my group plan when I’m a company of twenty people,” Sen told the magazine. He is the founder and C.E.O. of Gravie, a company that helps businesses make the switch to HRAs.

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