Title 18 of the new law, originally a separate bill called the 21st Century Cures Act for small businesses, the Healthcare Relief Act, allows companies to use Health Reimbursement Arrangements to compensate employees who buy their insurance.
Beginning on January 1st, a company with fewer than the equivalent of 50 full-time employees — that is, a business not subject to the Affordable Care Act’s employer mandate to offer insurance coverage to employees — can reimburse employees’ for purchasing individual health insurance as if it were directly paying the premiums on a group health policy: the employee won’t have to pay taxes on the company’s premium contribution, and the company won’t owe payroll taxes on it, either.
Reimbursement Limits Under the 21st Century Cures Act
The law sets some conditions for this new benefit: the company cannot offer a separate group health plan, and it must make the reimbursement available on the same terms to all employees, although it can vary the amount the reimbursement based on the employee’s age and family size, two main factors under the Affordable 21st Century Cures Act for small businesses that insurers can use to determine the cost of plans. The law limits reimbursement to $4,950 for individual insurance, and $10,000 for a family plan, amounts that are indexed for inflation.
The 21st Century Cures Act for small businesses brought significant benefits to companies with fewer than 50 employees. Title 18 of this legislation, based on the Small Business Healthcare Relief Act, introduced Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs).
These arrangements allow small businesses to reimburse employees for individual health insurance premiums tax-free. Employers benefit by avoiding payroll taxes, while employees gain untaxed premium contributions. To qualify, businesses must not offer group health plans and must provide reimbursements equitably, varying only by age or family size. Annual reimbursement caps are $4,950 for individuals and $10,000 for families, adjusted annually for inflation with 21st Century Cures Act for small businesses.
