The Internal Revenue Service is delaying fines on small businesses that provide tax-free premium assistance to their workers to purchase insurance through the individual market.
Those arrangements–known as health reimbursement arrangements (HRA)–don't meet the coverage requirements of the Affordable Care Act. Businesses that offer such assistance in lieu of a health plan deemed affordable and sufficient under the law would be subject to a fine of $100 per employee per day.
But the IRS issued guidance on Wednesday (PDF) delaying the assessment of those penalties until July 2015 for businesses with fewer than 50 employees. The agency indicated that the Small Business Health Options Program (SHOP) marketplaces should offer additional coverage options for small employers. But the IRS also acknowledged that some businesses “may need additional time to obtain group health coverage or adopt a suitable alternative.”
Small business groups welcomed the delay, but called for a full repeal of the financial penalties. “HRAs have been used by employers for decades as an alternative vehicle that allows employers to provide real benefits to workers,” said Joel White, president of the Council for Affordable Health Coverage, a coalition of employers and healthcare interests, including health insurer Aetna and the Pharmaceutical Research and Manufacturers of America. “The short term relief announced by Treasury today means Congress has a very short window to enact legislation to permanently fix this problem created by the Affordable Care Act,” White said in a statement.
Sen. Chuck Grassley (R-Iowa) also has pushed for repeal of the penalties. A similar proposal in the House has been backed by Reps. Mike Thompson (D-Calif.) and Dr. Charles Boustany, Jr. (R-La.).
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