Small Business Healthcare Relief Act

Summary: Small Business Healthcare Relief Act This bill amends the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 (ERISA) to allow an employer with fewer than 50 employees that does not offer group health insurance coverage to establish a health reimbursement arrangement. Under the arrangement, funds contributed by an employer are excluded from the employer's taxable income and are used to pay or reimburse employees for medical care expenses, including premiums for individual health insurance coverage or Medicare supplemental insurance. Such a reimbursement arrangement: (1) must not pay premiums for an employee covered by a family member's coverage, (2) must be offered to all eligible employees on the same terms and may only vary based on the number of individuals covered, and (3) is not required to provide continuation coverage. Employer contributions to a reimbursement arrangement are not included in an employee's gross income if the employee was covered by the reimbursement arrangement for more than nine months of the year. Employees covered for less than nine months have a percentage of employer contributions included in their gross income, with exceptions. An employee offered affordable individual health insurance coverage under a reimbursement arrangement is not eligible for a premium assistance tax credit. Employers must report contributions to a reimbursement arrangement on their employees' W-2. This bill amends the Public Health Service Act to exempt reimbursement arrangements from requirements for health insurance coverage. Insurance offered under a reimbursement arrangement remains subject to the requirements.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Healthcare Relief 
Act''.

SEC. 2. EXCEPTION FROM GROUP HEALTH PLAN REQUIREMENTS TO ALLOW SMALL 
              BUSINESSES TO USE PRE-TAX DOLLARS TO ASSIST EMPLOYEES IN 
              THE PURCHASE OF HEALTH INSURANCE IN THE INDIVIDUAL 
              MARKET.

    (a) Amendments to the Internal Revenue Code of 1986 and the Patient 
Protection and Affordable Care Act.--
            (1) In general.--Section 9831 of the Internal Revenue Code 
        of 1986 is amended by adding at the end the following new 
        subsection:
    ``(d) Certain Individual Health Insurance Policies Obtained Through 
Small Employers.--
            ``(1) In general.--The requirements of this chapter shall 
        not apply to any qualified small employer health reimbursement 
        arrangement.
            ``(2) Qualified small employer health reimbursement 
        arrangement.--For purposes of this subsection--
                    ``(A) In general.--The term `qualified small 
                employer health reimbursement arrangement' means an 
                arrangement which--
                            ``(i) is described in subparagraph (B), and
                            ``(ii) is offered on the same terms to all 
                        eligible employees of the eligible employer.
                    ``(B) Arrangement described.--An arrangement is 
                described in this subparagraph if--
                            ``(i) such arrangement is funded solely by 
                        an eligible employer and no salary reduction 
                        contributions may be made under such 
                        arrangement, and
                            ``(ii) such arrangement provides, after the 
                        employee provides proof of coverage to the 
                        employer, for the payment of, or reimbursement 
                        of, an eligible employee for--
                                    ``(I) expenses for medical care (as 
                                defined by subparagraphs (A), (B), and 
                                (C) section 213(d)) incurred by the 
                                eligible employee or the eligible 
                                employee's family members (as 
                                determined under the terms of the 
                                arrangement), and
                                    ``(II) including for--
                                            ``(aa) insurance (within 
                                        the meaning of section 
                                        213(d)(1)(D)) purchased on the 
                                        individual health insurance 
                                        market, and
                                            ``(bb) premiums under part 
                                        B of title XVIII of the Social 
                                        Security Act and any medicare 
                                        supplemental policy under 
                                        section 1882 of such Act.
                    ``(C) Payments for other insurance not permitted 
                under arrangement.--An arrangement shall not be treated 
                as described in subparagraph (B) if the arrangement 
                permits the employee to pay premiums for health 
                insurance coverage for the employee under the 
                employee's spouse or other family member health 
                insurance coverage.
                    ``(D) Certain variation permitted.--For purposes of 
                subparagraph (A)(ii), an arrangement shall not fail to 
                be treated as offered on the same terms to all eligible 
                employees merely because the employer contributions 
                under such arrangement vary based on the number of 
                individuals covered under such policy. The preceding 
                sentence shall not apply unless such variation is 
                consistently applied to all eligible employees and is 
                consistent with the price variation of coverage under 
                health insurance obtained in the relevant individual 
                health insurance market.
            ``(3) Other definitions.--For purposes of this subsection--
                    ``(A) Eligible employee.--The term `eligible 
                employee' means any employee of the employer except 
                that the terms of the arrangement may exclude from 
                consideration employees described in any clause of 
                section 105(h)(3)(B) (applied by substituting `90 days' 
                for `3 years' in clause (i) thereof).
                    ``(B) Eligible employer.--The term `eligible 
                employer' means an employer that--
                            ``(i) is not an applicable large employer 
                        as defined in section 4980H(c)(2), and
                            ``(ii) does not offer a group health plan 
                        (other than a qualified small employer health 
                        reimbursement arrangement) to any of its 
                        employees.
                    ``(C) Individual health insurance policy.--The term 
                `individual health insurance policy' means individual 
                health insurance coverage (as defined in section 
                2791(b) of the Public Health Service Act) which is 
                offered by a health insurance issuer (as so defined in 
                such section).''.
            (2) Exclusion from gross income.--Section 106 of such Code 
        is amended by adding at the end the following:
    ``(g) Qualified Small Employer Health Reimbursement Arrangement.--
            ``(1) In general.--In the case of an individual who is an 
        eligible employee (as defined in paragraph (3)(A) of section 
        9831(d)) with respect to an eligible employer (as defined in 
        paragraph (3)(B) of such section), the applicable percentage of 
        the aggregate contributions made for the taxable year by the 
        eligible employer under a qualified small employer health 
        reimbursement arrangement (as defined in paragraph (2) of such 
        section) with respect to the employee shall be treated as 
        employer-provided coverage for medical expenses under an 
        accident or health plan.
            ``(2) Applicable percentage.--For purposes of paragraph (1) 
        the applicable percentage shall be--
                    ``(A) 25 percent if the employee is covered for 
                less than 3 months in the taxable year by the qualified 
                small employer health reimbursement arrangement and the 
                employee draws amounts from the arrangement in any 
                month during which the employee is not so covered,
                    ``(B) 50 percent if the employee is covered for 
                more than 3 months but less than 6 months in the 
                taxable year by the qualified small employer health 
                reimbursement arrangement and the employee draws 
                amounts from the arrangement in any month during which 
                the employee is not so covered,
                    ``(C) 75 percent if the employee is covered for 
                more than 6 months but less than 9 months in the 
                taxable year by the qualified small employer health 
                reimbursement arrangement and the employee draws 
                amounts from the arrangement in any month during which 
                the employee is not so covered, and
                    ``(D) 100 percent if the employee is covered for 
                more than 9 months in the taxable year by the qualified 
                small employer health reimbursement arrangement.
            ``(3) Rule for special enrollment.--In the case of an 
        employee who first becomes covered under the qualified small 
        employer health reimbursement arrangement by reason of 
        enrollment during a special enrollment period for qualifying 
        events (under section 603 of Employee Retirement Income and 
        Security Act), in lieu of paragraph (2) the applicable 
        percentage shall be the ratio (expressed as a percentage) 
        that--
                    ``(A) the number of the months in the taxable year 
                for which such employee is covered by such arrangement, 
                bears to
                    ``(B) the total number of months in the taxable 
                year for which such employee is eligible to be covered 
                by such arrangement.''.
            (3) Exception from continuation coverage requirements.--
        Section 4980B(d) of such Code is amended by striking ``or'' at 
        the end of paragraph (2), by striking the period at the end of 
        paragraph (3) and inserting ``, or'', and by adding at the end 
        the following new paragraph:
            ``(4) any qualified small employer health reimbursement 
        arrangement (as defined in section 9831(d)(2)).''.
            (4) Exception from excise tax on high cost employer-
        sponsored health coverage.--Section 4980I(d)(2) of such Code is 
        amended by redesignating subparagraph (D) as subparagraph (E) 
        and by inserting after subparagraph (C) the following:
                    ``(D) In the case of applicable employer-sponsored 
                coverage consisting of coverage under any qualified 
                small employer health reimbursement arrangement (as 
                defined in section 9831(d)(2)), the cost of the 
                coverage shall be the amount reported under section 
                6051(a)(15).''.
            (5) Prevention of double benefit under health insurance 
        premium credit.--Section 36B(c)(2) of such Code is amended by 
        adding at the end the following new subparagraph:
                    ``(E) Special rule for certain individual health 
                insurance policies obtained through small employers.--
                            ``(i) In general.--The term `coverage 
                        month' shall not include any month with respect 
                        to an employee if for such month the employee 
                        is offered affordable coverage under an 
                        individual health insurance policy (as defined 
                        under section 9831(d)(3)(C)) under a qualified 
                        small employer health reimbursement arrangement 
                        (as defined in section 9831(d)(2)).
                            ``(ii) Affordable.--For purposes of clause 
                        (i), coverage shall be treated as affordable 
                        for a month if--
                                    ``(I) \1/12\ of the employer's 
                                contribution to the employee for a year 
                                under such arrangement is not less than 
                                the amount that would be paid by the 
                                employee for the premium for such month 
                                for the applicable second lowest cost 
                                self-only silver plan for self-only 
                                coverage with respect to the employee's 
                                individual market, and
                                    ``(II) the employee's cost for 
                                coverage under the individual health 
                                insurance policy under the qualified 
                                small employer health reimbursement 
                                arrangement for a year does not exceed 
                                the 9.5 percent of the employee's 
                                household income.''.
            (6) Employee notice.--Section 101 of the Employee 
        Retirement Income Security Act of 1974 (29 U.S.C. 1021) is 
        amended by adding at the end the following:
    ``(o) Notice Relating to Health Reimbursement Arrangements.--An 
employer maintaining a qualified small employer health reimbursement 
arrangement (as defined in section 9831(d)(2) of the Internal Revenue 
Code of 1986) shall, upon an election by an employee to participate in 
such qualified small employer health reimbursement arrangement, provide 
notice to the employee that if the employee is not covered under such 
arrangement for at least 9 of 12 months in the plan year, any funds 
under such arrangement may be includible in gross income.''.
            (7) Reporting.--
                    (A) W-2 reporting.--Section 6051(a) of such Code is 
                amended by striking ``and'' at the end of paragraph 
                (13), by striking the period at the end of paragraph 
                (14) and inserting ``, and'', and by inserting after 
                paragraph (14) the following new paragraph:
            ``(15) the total amount of employer contributions made for 
        the year under a qualified small employer health reimbursement 
        arrangement (as defined in section 9831(d)(2)) with respect to 
        the employee.''.
                    (B) Information required to be provided by exchange 
                subsidy applicants.--
                            (i) In general.--Section 1411(b)(3) of the 
                        Patient Protection and Affordable Care Act is 
                        amended by redesignating subparagraph (B) as 
                        subparagraph (C) and by inserting after 
                        subparagraph (A) the following new 
                        subparagraph:
                    ``(B) Certain individual health insurance policies 
                obtained through small employers.--The months (if any) 
                which the enrollee has or expects to have coverage 
                under an individual health insurance policy (as defined 
                in section 9831(d)(3)(C) of the Internal Revenue Code 
                of 1986) provided under a qualified small employer 
                health reimbursement arrangement (as defined in section 
                9831(d)(2) of such Code).''.
                            (ii) Special rule relating to verification 
                        of information required to be provided by 
                        exchange applicants.--Verification under 
                        section 1411 of the Patient Protection and 
                        Affordable Care Act of information provided 
                        under section 1411(b)(3)(B) of such Act shall 
                        apply with respect to months beginning after 
                        October 2016.
            (8) Effective date.--The amendments made by this subsection 
        shall apply to months beginning after the date of the enactment 
        of this Act.
    (b) Amendments to the Employee Retirement Income Security Act of 
1974.--
            (1) In general.--Section 732 of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1191a) is amended by 
        redesignating subsection (d) as subsection (e) and by inserting 
        after subsection (c) the following new subsection:
    ``(d) Exception for Certain Individual Health Insurance Policies 
Obtained Through Small Employers.--The requirements of this part shall 
not apply to any qualified small employer health reimbursement 
arrangement (as defined in section 9831(d)(2) of the Internal Revenue 
Code of 1986).''.
            (2) Exception from continuation coverage requirements.--
        Section 601 of such Act (29 U.S.C. 1161) is amended by adding 
        at the end the following new subsection:
    ``(c) Exception for Certain Individual Health Insurance Policies 
Obtained Through Small Employers.--Subsection (a) shall not apply to 
any qualified small employer health reimbursement arrangement (as 
defined in section 9831(d)(2) of the Internal Revenue Code of 1986).''.
            (3) Exception from certain other group health plan 
        requirements.--Section 609 of such Act (29 U.S.C. 1169) is 
        amended by redesignating subsection (e) as subsection (f) and 
        by inserting after subsection (d) the following new subsection:
    ``(e) Exception for Certain Individual Health Insurance Policies 
Obtained Through Small Employers.--The requirements of this section 
shall not apply to any qualified small employer health reimbursement 
arrangement (as defined in section 9831(d)(2) of the Internal Revenue 
Code of 1986).''.
            (4) Effective date.--The amendments made by this subsection 
        shall apply to months beginning after the date of the enactment 
        of this Act.
    (c) Amendments to Public Health Service Act.--
            (1) In general.--Part C of title XXVII of the Public Health 
        Service Act (42 U.S.C. 300gg-91 et seq.) is amended by adding 
        at the end the following new section:

``SEC. 2796. EXCEPTION FOR CERTAIN SMALL EMPLOYER PLANS TO PROVIDE 
              INDIVIDUAL HEALTH INSURANCE POLICIES.

    ``(a) In General.--The requirements of this title shall not apply 
to any qualified small employer health reimbursement arrangement (as 
defined in section 9831(d)(2) of the Internal Revenue Code of 1986).
    ``(b) Exception Not Applicable to Individual Health Insurance 
Offered Under the Plan or Arrangement.--Subsection (a) shall not apply 
with respect to any individual health insurance policy (as defined in 
section 9831(d)(3)(C) of such Code) offered under any such 
arrangement.''.
            (2) Exception from continuation coverage requirements.--
        Title XXII of the Public Health Service Act (42 U.S.C. 300bb-1 
        et seq.) is amended by adding at the end the following new 
        section:

``SEC. 2209. EXCEPTION FOR CERTAIN SMALL EMPLOYER PLANS TO PROVIDE 
              INDIVIDUAL HEALTH INSURANCE POLICIES.

    ``The requirements of this title shall not apply to any qualified 
small employer health reimbursement arrangement (as defined in section 
9831(d)(2) of the Internal Revenue Code of 1986).''.
            (3) Effective date.--The amendments made by this subsection 
        shall apply to months beginning after the date of the enactment 
        of this Act.