The 21st Century Cures Act reintroduced the stand-alone Health
Reimbursement Arrangement (HRA) for small businesses, making it possible for them to offer health benefits they may not have been able to afford otherwise. But implementing this new type of plan, known as the Small Business HRA, can be difficult for businesses whose employees don’t have health coverage.
Because the open enrollment period ended January 31, 2017, businesses that want to start offering the Small Business HRA must consider whether making a change outside an open enrollment period would negatively impact their employees.
Transitioning from a Group Health Policy
If your company is transitioning from group health insurance to the Small Business HRA, your path is simpler. First, you have to cancel your group health. This will trigger a special enrollment period, during which your employees can enroll in individual coverage and immediately begin using the Small Business HRA.
You must also comply with the notice requirements of the 21st Century Cues Act:-(The Small Business HRA allows companies with fewer than 50 employees to reimburse individual health insurance premiums and qualified medical expenses for their employees, as well as their employees’ spouses and dependents. Alongside the benefits of a Small Business HRA come a few responsibilities, however—including a requirement that companies offering the benefit provide a 90-day notice to their employees every year.)
This approach allows all employees to begin taking advantage of the Small Business HRA immediately.
If You Don’t Have a Current Policy
Fewer than half of small businesses offer group health insurance to their employees. If your business doesn’t offer a group health policy, it’s more difficult for the Small Business HRA to deliver immediate value to your employees.
Currently, implementing a Small Business HRA midyear doesn’t qualify employees for a special enrollment period. That means only employees with existing minimal essential coverage, whether through their own individual policy or a spouse’s plan, will be able to access Small Business HRA funds prior to open enrollment.
Employees currently without coverage will need to wait until the next open enrollment period, or another qualifying life event, to buy a policy and begin taking advantage of the Small Business HRA.
Additionally, the individual market doesn’t include new hires among the conditions that trigger a special enrollment period, which means employees hired midyear aren’t permitted to participate in the Small Business HRA until the next open enrollment period.
However, if the new hire is losing group health insurance through their previous employer, they will qualify for a special enrollment period. This means they will be able to enroll in new individual health insurance and begin accessing HRA funds.
Overall, if you’re adopting the Small Business HRA after offering no health benefits, only employees enrolled in prior coverage will immediately benefit from the HRA.
Many factors go into a company’s decision to implement the Small Business HRA. If you’re thinking about making the change outside of an open enrollment period, it’s important to consider how doing so will affect your employees and whether they can take advantage of the benefits right away. In some cases, waiting until all employees are eligible to enroll in coverage under the Small Business HRA may be the better choice.
Eric Walters – Insurance Services.