II 

114TH CONGRESS 

1ST SESSION S. 1697 

To provide an exception from certain group health plan requirements to 

allow small businesses to use pre-tax dollars to assist employees in 

the purchase of policies in the individual health insurance market, and 

for other purposes. 

IN THE SENATE OF THE UNITED STATES 

JUNE 25, 2015 

Mr. GRASSLEY (for himself and Ms. HEITKAMP) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To provide an exception from certain group health plan requirements to allow small businesses to use pre-tax dollars to assist employees in the purchase of policies in 

the individual health insurance market, and for other 

purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business 

5 Healthcare Relief Act’’. 


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1 SEC. 2. EXCEPTION FROM GROUP HEALTH PLAN REQUIRE2 MENTS TO ALLOW SMALL BUSINESSES TO 

3 USE PRE-TAX DOLLARS TO ASSIST EMPLOY4 EES IN THE PURCHASE OF HEALTH INSUR5 ANCE IN THE INDIVIDUAL MARKET. 

6 (a) AMENDMENTS TO THE INTERNAL REVENUE

7 CODE OF 1986 AND THE PATIENT PROTECTION AND AF8 FORDABLE CARE ACT.— 

9 (1) IN GENERAL.—Section 9831 of the Internal 

10 Revenue Code of 1986 is amended by adding at the 

11 end the following new subsection: 

12 ‘‘(d) CERTAIN INDIVIDUAL HEALTH INSURANCE

13 POLICIES OBTAINED THROUGH SMALL EMPLOYERS.— 

14 ‘‘(1) IN GENERAL.—The requirements of this 

15 chapter shall not apply to any qualified small em16 ployer health reimbursement arrangement. 

17 ‘‘(2) QUALIFIED SMALL EMPLOYER HEALTH

18 REIMBURSEMENT ARRANGEMENT.—For purposes of 

19 this subsection— 

20 ‘‘(A) IN GENERAL.—The term ‘qualified 

21 small employer health reimbursement arrange22 ment’ means an arrangement which— 

23 ‘‘(i) is described in subparagraph (B), 

24 and 


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1 ‘‘(ii) is offered on the same terms to 

2 all eligible employees of the eligible em3 ployer. 

4 ‘‘(B) ARRANGEMENT DESCRIBED.—An ar5 rangement is described in this subparagraph 

6 if— 

7 ‘‘(i) such arrangement is funded solely 

8 by an eligible employer and no salary re9 duction contributions may be made under 

10 such arrangement, and 

11 ‘‘(ii) such arrangement provides, after 

12 the employee provides proof of coverage to 

13 the employer, for the payment of, or reim14 bursement of, an eligible employee for— 

15 ‘‘(I) expenses for medical care 

16 (as defined by subparagraphs (A), 

17 (B), and (C) section 213(d)) incurred 

18 by the eligible employee or the eligible 

19 employee’s family members (as deter20 mined under the terms of the arrange21 ment), and 

22 ‘‘(II) including for— 

23 ‘‘(aa) insurance (within the 

24 meaning of section 213(d)(1)(D)) 


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1 purchased on the individual 

2 health insurance market, and 

3 ‘‘(bb) premiums under part 

4 B of title XVIII of the Social Se5 curity Act and any medicare sup6 plemental policy under section 

7 1882 of such Act. 

8 ‘‘(C) PAYMENTS FOR OTHER INSURANCE

9 NOT PERMITTED UNDER ARRANGEMENT.—An 

10 arrangement shall not be treated as described 

11 in subparagraph (B) if the arrangement per12 mits the employee to pay premiums for health 

13 insurance coverage for the employee under the 

14 employee’s spouse or other family member 

15 health insurance coverage. 

16 ‘‘(D) CERTAIN VARIATION PERMITTED.— 

17 For purposes of subparagraph (A)(ii), an ar18 rangement shall not fail to be treated as offered 

19 on the same terms to all eligible employees 

20 merely because the employer contributions 

21 under such arrangement vary based on the 

22 number of individuals covered under such pol23 icy. The preceding sentence shall not apply un24 less such variation is consistently applied to all 

25 eligible employees and is consistent with the 


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1 price variation of coverage under health insur2 ance obtained in the relevant individual health 

3 insurance market. 

4 ‘‘(3) OTHER DEFINITIONS.—For purposes of 

5 this subsection— 

6 ‘‘(A) ELIGIBLE EMPLOYEE.—The term ‘eli7 gible employee’ means any employee of the em8 ployer except that the terms of the arrangement 

9 may exclude from consideration employees de10 scribed in any clause of section 105(h)(3)(B) 

11 (applied by substituting ‘90 days’ for ‘3 years’ 

12 in clause (i) thereof). 

13 ‘‘(B) ELIGIBLE EMPLOYER.—The term ‘el14 igible employer’ means an employer that— 

15 ‘‘(i) is not an applicable large em16 ployer as defined in section 4980H(c)(2), 

17 and 

18 ‘‘(ii) does not offer a group health 

19 plan (other than a qualified small employer 

20 health reimbursement arrangement) to any 

21 of its employees. 

22 ‘‘(C) INDIVIDUAL HEALTH INSURANCE

23 POLICY.—The term ‘individual health insurance 

24 policy’ means individual health insurance cov25 erage (as defined in section 2791(b) of the PubVerDate Sep 11 2014 02:13 Jun 30, 2015 Jkt 049200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1697.IS S1697

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1 lic Health Service Act) which is offered by a 

2 health insurance issuer (as so defined in such 

3 section).’’. 

4 (2) EXCLUSION FROM GROSS INCOME.—Section 

5 106 of such Code is amended by adding at the end 

6 the following: 

7 ‘‘(g) QUALIFIED SMALL EMPLOYER HEALTH REIM8 BURSEMENT ARRANGEMENT.— 

9 ‘‘(1) IN GENERAL.—In the case of an individual 

10 who is an eligible employee (as defined in paragraph 

11 (3)(A) of section 9831(d)) with respect to an eligible 

12 employer (as defined in paragraph (3)(B) of such 

13 section), the applicable percentage of the aggregate 

14 contributions made for the taxable year by the eligi15 ble employer under a qualified small employer health 

16 reimbursement arrangement (as defined in para17 graph (2) of such section) with respect to the em18 ployee shall be treated as employer-provided cov19 erage for medical expenses under an accident or 

20 health plan. 

21 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

22 of paragraph (1) the applicable percentage shall 

23 be— 

24 ‘‘(A) 25 percent if the employee is covered 

25 for less than 3 months in the taxable year by 


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1 the qualified small employer health reimburse2 ment arrangement and the employee draws 

3 amounts from the arrangement in any month 

4 during which the employee is not so covered, 

5 ‘‘(B) 50 percent if the employee is covered 

6 for more than 3 months but less than 6 months 

7 in the taxable year by the qualified small em8 ployer health reimbursement arrangement and 

9 the employee draws amounts from the arrange10 ment in any month during which the employee 

11 is not so covered, 

12 ‘‘(C) 75 percent if the employee is covered 

13 for more than 6 months but less than 9 months 

14 in the taxable year by the qualified small em15 ployer health reimbursement arrangement and 

16 the employee draws amounts from the arrange17 ment in any month during which the employee 

18 is not so covered, and 

19 ‘‘(D) 100 percent if the employee is cov20 ered for more than 9 months in the taxable 

21 year by the qualified small employer health re22 imbursement arrangement. 

23 ‘‘(3) RULE FOR SPECIAL ENROLLMENT.—In the 

24 case of an employee who first becomes covered under 

25 the qualified small employer health reimbursement 


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1 arrangement by reason of enrollment during a spe2 cial enrollment period for qualifying events (under 

3 section 603 of Employee Retirement Income and Se4 curity Act), in lieu of paragraph (2) the applicable 

5 percentage shall be the ratio (expressed as a per6 centage) that— 

7 ‘‘(A) the number of the months in the tax8 able year for which such employee is covered by 

9 such arrangement, bears to 

10 ‘‘(B) the total number of months in the 

11 taxable year for which such employee is eligible 

12 to be covered by such arrangement.’’. 

13 (3) EXCEPTION FROM CONTINUATION COV14 ERAGE REQUIREMENTS.—Section 4980B(d) of such 

15 Code is amended by striking ‘‘or’’ at the end of 

16 paragraph (2), by striking the period at the end of 

17 paragraph (3) and inserting ‘‘, or’’, and by adding 

18 at the end the following new paragraph: 

19 ‘‘(4) any qualified small employer health reim20 bursement arrangement (as defined in section 

21 9831(d)(2)).’’. 

22 (4) EXCEPTION FROM EXCISE TAX ON HIGH

23 COST EMPLOYER-SPONSORED HEALTH COVERAGE.— 

24 Section 4980I(d)(2) of such Code is amended by re25 designating subparagraph (D) as subparagraph (E) 


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1 and by inserting after subparagraph (C) the fol2 lowing: 

3 ‘‘(D) In the case of applicable employer4 sponsored coverage consisting of coverage under 

5 any qualified small employer health reimburse6 ment arrangement (as defined in section 

7 9831(d)(2)), the cost of the coverage shall be 

8 the amount reported under section 

9 6051(a)(15).’’. 

10 (5) PREVENTION OF DOUBLE BENEFIT UNDER

11 HEALTH INSURANCE PREMIUM CREDIT.—Section 

12 36B(c)(2) of such Code is amended by adding at the 

13 end the following new subparagraph: 

14 ‘‘(E) SPECIAL RULE FOR CERTAIN INDI15 VIDUAL HEALTH INSURANCE POLICIES OB16 TAINED THROUGH SMALL EMPLOYERS.— 

17 ‘‘(i) IN GENERAL.—The term ‘cov18 erage month’ shall not include any month 

19 with respect to an employee if for such 

20 month the employee is offered affordable 

21 coverage under an individual health insur22 ance policy (as defined under section 

23 9831(d)(3)(C)) under a qualified small em24 ployer health reimbursement arrangement 

25 (as defined in section 9831(d)(2)). 


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1 ‘‘(ii) AFFORDABLE.—For purposes of 

2 clause (i), coverage shall be treated as af3 fordable for a month if— 

‘‘(I) 1 4 ⁄12 of the employer’s con5 tribution to the employee for a year 

6 under such arrangement is not less 

7 than the amount that would be paid 

8 by the employee for the premium for 

9 such month for the applicable second 

10 lowest cost self-only silver plan for 

11 self-only coverage with respect to the 

12 employee’s individual market, and 

13 ‘‘(II) the employee’s cost for cov14 erage under the individual health in15 surance policy under the qualified 

16 small employer health reimbursement 

17 arrangement for a year does not ex18 ceed the 9.5 percent of the employee’s 

19 household income.’’. 

20 (6) EMPLOYEE NOTICE.—Section 101 of the 

21 Employee Retirement Income Security Act of 1974 

22 (29 U.S.C. 1021) is amended by adding at the end 

23 the following: 

24 ‘‘(o) NOTICE RELATING TO HEALTH REIMBURSE25 MENT ARRANGEMENTS.—An employer maintaining a 


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1 qualified small employer health reimbursement arrange2 ment (as defined in section 9831(d)(2) of the Internal 

3 Revenue Code of 1986) shall, upon an election by an em4 ployee to participate in such qualified small employer 

5 health reimbursement arrangement, provide notice to the 

6 employee that if the employee is not covered under such 

7 arrangement for at least 9 of 12 months in the plan year, 

8 any funds under such arrangement may be includible in 

9 gross income.’’. 

10 (7) REPORTING.— 

11 (A) W–2 REPORTING.—Section 6051(a) of 

12 such Code is amended by striking ‘‘and’’ at the 

13 end of paragraph (13), by striking the period at 

14 the end of paragraph (14) and inserting ‘‘, 

15 and’’, and by inserting after paragraph (14) the 

16 following new paragraph: 

17 ‘‘(15) the total amount of employer contribu18 tions made for the year under a qualified small em19 ployer health reimbursement arrangement (as de20 fined in section 9831(d)(2)) with respect to the em21 ployee.’’. 

22 (B) INFORMATION REQUIRED TO BE PRO23 VIDED BY EXCHANGE SUBSIDY APPLICANTS.— 

24 (i) IN GENERAL.—Section 1411(b)(3) 

25 of the Patient Protection and Affordable 


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1 Care Act is amended by redesignating sub2 paragraph (B) as subparagraph (C) and by 

3 inserting after subparagraph (A) the fol4 lowing new subparagraph: 

5 ‘‘(B) CERTAIN INDIVIDUAL HEALTH IN6 SURANCE POLICIES OBTAINED THROUGH SMALL

7 EMPLOYERS.—The months (if any) which the 

8 enrollee has or expects to have coverage under 

9 an individual health insurance policy (as de10 fined in section 9831(d)(3)(C) of the Internal 

11 Revenue Code of 1986) provided under a quali12 fied small employer health reimbursement ar13 rangement (as defined in section 9831(d)(2) of 

14 such Code).’’. 

15 (ii) SPECIAL RULE RELATING TO

16 VERIFICATION OF INFORMATION REQUIRED

17 TO BE PROVIDED BY EXCHANGE APPLI18 CANTS.—Verification under section 1411 

19 of the Patient Protection and Affordable 

20 Care Act of information provided under 

21 section 1411(b)(3)(B) of such Act shall 

22 apply with respect to months beginning 

23 after October 2016. 


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1 (8) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to months beginning 

3 after the date of the enactment of this Act. 

4 (b) AMENDMENTS TO THE EMPLOYEE RETIREMENT

5 INCOME SECURITY ACT OF 1974.— 

6 (1) IN GENERAL.—Section 732 of the Employee 

7 Retirement Income Security Act of 1974 (29 U.S.C. 

8 1191a) is amended by redesignating subsection (d) 

9 as subsection (e) and by inserting after subsection 

10 (c) the following new subsection: 

11 ‘‘(d) EXCEPTION FOR CERTAIN INDIVIDUAL HEALTH

12 INSURANCE POLICIES OBTAINED THROUGH SMALL EM13 PLOYERS.—The requirements of this part shall not apply 

14 to any qualified small employer health reimbursement ar15 rangement (as defined in section 9831(d)(2) of the Inter16 nal Revenue Code of 1986).’’. 

17 (2) EXCEPTION FROM CONTINUATION COV18 ERAGE REQUIREMENTS.—Section 601 of such Act 

19 (29 U.S.C. 1161) is amended by adding at the end 

20 the following new subsection: 

21 ‘‘(c) EXCEPTION FOR CERTAIN INDIVIDUAL HEALTH

22 INSURANCE POLICIES OBTAINED THROUGH SMALL EM23 PLOYERS.—Subsection (a) shall not apply to any qualified 

24 small employer health reimbursement arrangement (as deVerDate Sep 11 2014 02:13 Jun 30, 2015 Jkt 049200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S1697.IS S1697

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1 fined in section 9831(d)(2) of the Internal Revenue Code 

2 of 1986).’’. 

3 (3) EXCEPTION FROM CERTAIN OTHER GROUP

4 HEALTH PLAN REQUIREMENTS.—Section 609 of 

5 such Act (29 U.S.C. 1169) is amended by redesig6 nating subsection (e) as subsection (f) and by insert7 ing after subsection (d) the following new sub8 section: 

9 ‘‘(e) EXCEPTION FOR CERTAIN INDIVIDUAL HEALTH

10 INSURANCE POLICIES OBTAINED THROUGH SMALL EM11 PLOYERS.—The requirements of this section shall not 

12 apply to any qualified small employer health reimburse13 ment arrangement (as defined in section 9831(d)(2) of the 

14 Internal Revenue Code of 1986).’’. 

15 (4) EFFECTIVE DATE.—The amendments made 

16 by this subsection shall apply to months beginning 

17 after the date of the enactment of this Act. 

18 (c) AMENDMENTS TO PUBLIC HEALTH SERVICE

19 ACT.— 

20 (1) IN GENERAL.—Part C of title XXVII of the 

21 Public Health Service Act (42 U.S.C. 300gg–91 et 

22 seq.) is amended by adding at the end the following 

23 new section: 


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1 ‘‘SEC. 2796. EXCEPTION FOR CERTAIN SMALL EMPLOYER 

2 PLANS TO PROVIDE INDIVIDUAL HEALTH IN3 SURANCE POLICIES. 

4 ‘‘(a) IN GENERAL.—The requirements of this title 

5 shall not apply to any qualified small employer health re6 imbursement arrangement (as defined in section 

7 9831(d)(2) of the Internal Revenue Code of 1986). 

8 ‘‘(b) EXCEPTION NOT APPLICABLE TO INDIVIDUAL

9 HEALTH INSURANCE OFFERED UNDER THE PLAN OR

10 ARRANGEMENT.—Subsection (a) shall not apply with re11 spect to any individual health insurance policy (as defined 

12 in section 9831(d)(3)(C) of such Code) offered under any 

13 such arrangement.’’. 

14 (2) EXCEPTION FROM CONTINUATION COV15 ERAGE REQUIREMENTS.—Title XXII of the Public 

16 Health Service Act (42 U.S.C. 300bb–1 et seq.) is 

17 amended by adding at the end the following new sec18 tion: 

19 ‘‘SEC. 2209. EXCEPTION FOR CERTAIN SMALL EMPLOYER 

20 PLANS TO PROVIDE INDIVIDUAL HEALTH IN21 SURANCE POLICIES. 

22 ‘‘The requirements of this title shall not apply to any 

23 qualified small employer health reimbursement arrange24 ment (as defined in section 9831(d)(2) of the Internal 

25 Revenue Code of 1986).’’. 


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1 (3) EFFECTIVE DATE.—The amendments made 

2 by this subsection shall apply to months beginning 

3 after the date of the enactment of this Act. 

Æ 


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