It’s February, tax time is well underway and at least one group is contending the Internal Revenue Service is “picking on the little guy.”
Consumer advocate Joel White claims small businesses and companies are being fined large amounts of money for doing nothing more than giving their employees money to help pay for insurance.
“The feds claim the arrangement subverts the Affordable Care Act by allowing employers to avoid offering full-fledged insurance policies,” White wrote in an opinion piece published last year. “But the fines are actually depriving small-business employees of thousands of dollars in compensation – and reducing the number of people with insurance.”
Michelle Stevens, senior vice-president for the Council on Affordable Health Care Coverage, told The Lakeland Times “this is a case of no good deed goes unpunished for small businesses.”
“Under the Affordable Care Act, businesses with less than 50 employees don’t have to provide health insurance for their workers,” she said. “Despite that, many small business owners want to do right by their employees and they want to help them with the cost of insurance and medical care.”
Stevenson said historically, many small businesses have offered employees health care reimbursement arrangements, known as HRAs, to help with rising health care costs.
“These employers think HRAs help families better afford high deductibles we often see in Obamacare plans,” she said. “What’s happening is these small business owners are doing the right thing but the IRS is saying these HRAs are wrong.”
The IRS declined to comment for this story but provided links to its website explaining its policies regarding HRAs.
Stevenson said she’s thoroughly studied the material.
“In my view, the IRS is interpreting HRAs to be group health plans,” she said. “Because of that, the HRAs are required to meet certain market rules and regulations so they have to cover preventative benefits at no cost.”
They also can’t impose limits on annual benefits, Stevenson said.
“Because HRAs are reimbursement arrangements, they don’t meet these rules,” she said. “If an employer decides to give an employee $1,300, that amount is capped at $1,300 for that year. Because HRAs don’t meet set rules and the IRS is defining them as group health plans, employers can be fined an outrageous amount.”
The fine is $100 per day per employee.