Update on health benefits: Removing some of the confusion
Health care for your dental team members is becoming confusing. The experts at Bent Erickson & Associates strive to make the latest news about health care benefits easier for you to understand.
Tired of hearing about health-care reform? You’re probably not alone. Today, the conversation has gotten convoluted, polarizing, and heated. Fear not! This article will actually shed light on some good health-care news.
Once upon a time, employers had more choices regarding employee health benefits. They could offer full health insurance, no health insurance, or just issue cash stipends for employees to acquire insurance on their own. All of that changed in 2010 with the Affordable Care Act (ACA).
After the ACA was enacted, the option of providing cash stipends in lieu of health insurance was all but eliminated. In an effort not to overly complicate matters, basically employers of any size could not tie receiving stipends (pre- or posttax) to obtaining health insurance. Thus, the only way to provide a health benefit without offering paid health insurance was to increase employees’ compensation. This was not ideal for many employers, particularly small ones.
At the end of 2016, President Obama and Congress enacted the 21stCentury Cures Act. This did several things, but the most promising part helped small employers provide pretax benefits for employees to buy health insurance elsewhere, thus allowing for a version of pretax stipends.
As of January 1, 2017, small employers can implement a qualified small employer health reimbursement arrangement (QSEHRA). Small employers can implement the QSEHRA as long as the following criteria are met:
- The employer averaged fewer than 50 full-time employees during the most recent calendar year and is, therefore, not subject to the ACA.
- The employer does not provide health insurance to any employees in the practice.
Once implemented, the QSEHRA provides an avenue for employees to be reimbursed for any documented health-care expense, including premiums paid to secure health insurance with another entity.
The QSEHRA is to be funded 100% by the employer with no exceptions. Employers are currently limited to a cost of $4,950 for an individual employee, or $10,000 for families, in a calendar year. The terms of the benefit an employer provides must be applied equally among all eligible employees. In other words, an employer can’t reimburse 100% of the premium for some employees and 50% for others. Also, the law basically requires all employees to be eligible for the QSEHRA with very few exceptions.
Before implementing the QSEHRA, an employer must provide notice annually. This must be issued 90 days before the beginning of each calendar year. Once the QSEHRA is established, new employees must be given notice at least 90 days before they become eligible. This notice must
- define which employees are eligible;
- define the QSEHRA benefit being provided;
- inform employees that they are required to report the benefit when applying for renewed coverage purchased through an exchange or marketplace; and
- remind employees that they are still subject to the individual penalty for the months when they do not have coverage.
At the end of the tax year, employers must report the benefit on employees’ W-2s and send a 1095-B form to each eligible employee. In addition, the 1095-B data must be sent to the IRS using the 1094-B form.
One final note: since the QSEHRA can be used for reimbursement for any documented health-care expense, it is recommended that employers contract with a third-party entity to manage the program. There is a plethora of laws in place that protect employees from sharing their health or medical histories (or those of their families) with employers. Receiving the documentation required to adequately reimburse for health expenses may subject employers to gaining inappropriate information about their employees. Thus, it is best for a neutral party to receive this information and process it accordingly.
The ability to provide a QSEHRA is a step in the right direction for small employers. It’s an opportunity to offer a pretax benefit in lieu of actual health insurance that may be too costly otherwise. To act on this as a calendar-year program, employers must have a plan by October 2017 to cover the 90-day posting requirement and be ready for 2018. We encourage dentists to work with a professional CPA or health-care legal professional to ensure complete compliance.
Tim Twigg is the president of Bent Ericksen & Associates and Rebecca Boartfield is an HR compliance consultant. For more than 30 years, the company has been a leading authority in human resources and personnel issues, helping dentists successfully deal with ever-changing and complex labor laws. To receive a complimentary copy of the company’s quarterly newsletter or to learn more, call (800) 679-2760 or visit bentericksen.com.