New Law Will Allow Small Employers to Sponsor Health Reimbursement Arrangements
A new law, that was signed by President Obama on Dec.13, 2016, will impact employee health benefits offered by small employers. If you are a qualified small employer, you can now sponsor health reimbursement arrangements (HRAs) which until now were only available to applicable large employers (ALEs).
Other provisions in the 21st Century Cures Act will improve compliance with mental health parity and address some issues under the Health Insurance Portability and Accountability Act (HIPAA) about the disclosure of protected health information (PHI) for those with mental illness. Here is a summary of three key components of the law and how it will impact your business:
1) Health reimbursement arrangements
HRAs are used by employers to assist employees in defraying the out-of-pocket costs associated with certain medical services. They are most commonly used to help employees cover the cost of a high deductible.
This law provides for qualified small employers to fund this type of arrangement on behalf of their employees if they do not offer those employees a group health plan. The account would be indexed to a maximum of $4,950 per year with annual cost-of-living adjustments. As with other types of benefits, these accounts must be offered to all similarly-situated employees, however only employees who have minimum essential coverage can exclude the account from income. Guidance regarding how such exclusions should be applied is expected from the Internal Revenue Service (IRS).
2) Mental health parity
Originally, the Mental Health Parity Act was enacted in 1996 and covered both self-insured and fully insured health plans. The purpose of the law was to put coverage for mental health services on par with those of medical services. Over the years, the Act has been made more robust under various newer laws such as the Affordable Care Act (ACA).
This latest iteration is directed at improving compliance with mental health parity for group health plans. The 21st Century Cures Act will establish a mechanism by which federal agencies must issue guidance for carriers on compliance and must audit plans that violate that guidance more than five times. More importantly, this new law includes eating disorders as inclusive under mental health coverage, thereby providing better coverage for those who require help.
Much like the Mental Health Parity Act, HIPAA has also been around since 1996 and has gone through several updates. The heart of HIPAA has always been the protection of personal information, particularly health information.
The 21st Century Cures Act recognizes that in the case of caregivers responsible for those with mental or substance abuse issues, there is confusion for providers as to when and how PHI can be shared. The law updates the circumstances under which families can be made aware of and intervene on behalf of a patient unable to do so due to mental incapacity.
Further, it will provide for the means to have professionals make decisions on behalf of patients unable to do so as a result of temporary or permanent incapacitation. This new update will begin in the form of a model program which will then be evaluated to make sure that the rights of the patients are not violated and that decisions are made in the best interest of the patients involved. The model programs will take place over a period of several years starting in 2018.
Other projects and plans
In addition to the three components mentioned above, there are a host of other measures in this law. Some of these include:
- Advancing drug therapies
- Medical device innovation
- Some scaling back of Medicaid programs and more oversight of Medicaid providers
The road ahead
The future of healthcare in the United States is in flux as we await the inauguration of a new president and the start of the new congressional session. TriNet will continue to monitor these changes and provide updates on the latest information affecting businesses to provide expert advice to our clients.
This communication is for informational purposes only; it is not legal, tax or accounting advice; and is not an offer to sell, buy or procure insurance.
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