SEC. 2. EXCEPTION FROM GROUP HEALTH PLAN REQUIRE-
MENTS FOR QUALIFIED SMALL EMPLOYER 
HEALTH REIMBURSEMENT ARRANGEMENTS. 
(a) AMENDMENTS
TO
THE INTERNAL REVENUE 
CODE OF 1986 AND THE PATIENT PROTECTION AND AF-
FORDABLE 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) EXCEPTION FOR QUALIFIED SMALL EMPLOYER 
HEALTH REIMBURSEMENT ARRANGEMENTS.— 
‘‘(1) IN GENERAL.—For purposes of this title 
(except as provided in section 4980I(f)(4) and not-
withstanding any other provision of this title), the 
term ‘group health plan’ shall not include any quali-
fied small employer health reimbursement arrange-
ment. 
‘‘(2) QUALIFIED
SMALL
EMPLOYER
HEALTH 
REIMBURSEMENT ARRANGEMENT.—For purposes of 
this subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
small employer health reimbursement arrange-
ment’ means an arrangement which— 
‘‘(i) is described in subparagraph (B), 
and 
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‘‘(ii) is provided on the same terms to 
all eligible employees of the eligible em-
ployer. 
‘‘(B) ARRANGEMENT DESCRIBED.—An ar-
rangement is described in this subparagraph 
if— 
‘‘(i) such arrangement is funded solely 
by an eligible employer and no salary re-
duction contributions may be made under 
such arrangement, 
‘‘(ii) such arrangement provides, after 
the employee provides proof of coverage, 
for the payment of, or reimbursement of, 
an eligible employee for expenses for med-
ical care (as defined in section 213(d)) in-
curred by the eligible employee or the eligi-
ble employee’s family members (as deter-
mined under the terms of the arrange-
ment), and 
‘‘(iii) the amount of payments and re-
imbursements described in clause (ii) for 
any year do not exceed $5,130 ($10,260 in 
the case of an arrangement that also pro-
vides for payments or reimbursements for 
family members of the employee). 
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‘‘(C) CERTAIN
VARIATION
PERMITTED.— 
For purposes of subparagraph (A)(ii), an ar-
rangement shall not fail to be treated as pro-
vided on the same terms to each eligible em-
ployee merely because the employee’s permitted 
benefits under such arrangement vary in ac-
cordance with the variation in the price of an 
insurance policy in the relevant individual 
health insurance market based on— 
‘‘(i) the age of the eligible employee 
(and, in the case of an arrangement which 
covers medical expenses of the eligible em-
ployee’s family members, the age of such 
family members), or 
‘‘(ii) the number of family members of 
the eligible employee the medical expenses 
of which are covered under such arrange-
ment. 
The variation permitted under the preceding 
sentence shall be determined by reference to the 
same insurance policy with respect to all eligible 
employees. 
‘‘(D) RULES RELATING TO MAXIMUM DOL-
LAR LIMITATION.— 
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‘‘(i) AMOUNT PRORATED IN CERTAIN 
CASES.—In the case of an individual who 
is not covered by an arrangement for the 
entire year, the limitation under subpara-
graph (A)(iii) for such year shall be an 
amount which bears the same ratio to the 
amount which would (but for this clause) 
be in effect for such individual for such 
year under subparagraph (A)(iii) as the 
number of months for which such indi-
vidual is covered by the arrangement for 
such year bears to 12. 
‘‘(ii) INFLATION
ADJUSTMENT.—In 
the case of any year beginning after 2016, 
each of the dollar amounts in subpara-
graph (A)(iii) shall be increased by an 
amount equal to— 
‘‘(I) such dollar amount, multi-
plied by 
‘‘(II) the cost-of-living adjust-
ment determined under section 1(f)(3) 
for the calendar year in which the tax-
able year begins, determined by sub-
stituting ‘calendar year 2015’ for ‘cal-
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endar year 1992’ in subparagraph (B) 
thereof. 
If any dollar amount increased under the 
preceding sentence is not a multiple of 
$100, such dollar amount shall be rounded 
to the next lowest multiple of $100. 
‘‘(3) OTHER
DEFINITIONS.—For purposes of 
this subsection— 
‘‘(A) ELIGIBLE EMPLOYEE.—The term ‘eli-
gible employee’ means any employee of an eligi-
ble employer, except that the terms of the ar-
rangement may exclude from consideration em-
ployees 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 ‘el-
igible employer’ means an employer that— 
‘‘(i) is not an applicable large em-
ployer as defined in section 4980H(c)(2), 
and 
‘‘(ii) does not offer a group health 
plan to any of its employees. 
‘‘(C) PERMITTED
BENEFIT.—The term 
‘permitted benefit’ means, with respect to any 
eligible employee, the maximum dollar amount 
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of payments and reimbursements which may be 
made under the terms of the qualified small 
employer health reimbursement arrangement 
for the year with respect to such employee. 
‘‘(4) NOTICE.— 
‘‘(A) IN GENERAL.—An employer funding 
a qualified small employer health reimburse-
ment arrangement for any year shall, not later 
than 90 days before the beginning of such year 
(or, in the case of an employee who is not eligi-
ble to participate in the arrangement as of the 
beginning of such year, the date on which such 
employee is first so eligible), provide a written 
notice to each eligible employee which includes 
the information described in subparagraph (B). 
‘‘(B) CONTENTS OF NOTICE.—The notice 
required under subparagraph (A) shall include 
each of the following: 
‘‘(i) A statement of the amount which 
would be such eligible employee’s permitted 
benefits under the arrangement for the 
year. 
‘‘(ii) A statement that the eligible em-
ployee should provide the information de-
scribed in clause (i) to any health insur-
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