Small Business Healthcare Relief Act

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. Short title This Act may be cited as the Small Business Healthcare Relief Act 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 (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 (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 90 days 3 years (B) Eligible employer The term eligible employer (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 . (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 health plan 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 health plan 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 health plan 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 health plan. (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 , or (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 (ii) Affordable For purposes of clause (i), coverage shall be treated as affordable for a month if— (I) 1/12 (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 (o) Notice relating to health reimbursement arrangements An employer maintaining a qualified small employer health reimbursement arrangement (as defined in section 9831(d)(2) . (7) Reporting (A) W–2 reporting Section 6051(a) of such Code is amended by striking and , and (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) . (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 (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) . (2) Exception from continuation coverage requirements Section 601 of such Act ( 29 U.S.C. 1161 (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) . (3) Exception from certain other group health plan requirements Section 609 of such Act ( 29 U.S.C. 1169 (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) . (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. 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) (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. 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) . (3) Effective date The amendments made by this subsection shall apply to months beginning after the date of the enactment of this 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.