Update:  The 21st Century Cures Act was signed into law on December 13.

The U.S. Senate has approved the 21st Century Cures Act, agreeing to the House amendments to the Act.  The bill contains, among numerous other provisions, a provision (Act Section 18001) that will exempt certain small business health reimbursement arrangements (HRAs), including those reimbursing private insurance premiums, from the $100 per day penalty for a non-compliant group health plan provided by adding a new exception to IRC §9831.  The President has announced that he will sign the bill.

In Notice 2013-54 the IRS held that an employer that reimburses individual insurance policies would generally be found to have a group health plan that failed to comply with the requirements of the Affordable Care Act.  Under IRC §4980D an employer operating a non-compliant plan would be subject to a $100 penalty per day per affected employee for the period the plan was operated.

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Another unexpected consequence of the IRS’s interpretation of the interaction of the market reform rules and reimbursement of individual policies in Notice 2013-54, leading to a new temporary relief provision for premium reduction arrangements related to student health plans in Notice 2016-17.  The Department of Labor later extended this relief until further guidance is issued in FAQs About Affordable Care Act Implementation Part 33 posted on the ESBA’s website.

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In Information Letter 2016-006 the IRS reaffirmed that an employer does not run afoul of the penalties imposed on employer plans that reimburse private insurance coverage if such a plan covers only a single employee.

The letter was written in response to an inquiry by Representative Tom Price on behalf of a constituent asking whether he could continue to reimburse the medical insurance premiums of his only employee without running afoul of the Affordable Care Act (ACA).  More specifically the issue is avoiding the $100 per day penalty under IRC §4980D for having a plan that was in violation of market reform rules for employer sponsored group plans.

Another unexpected consequence of the IRS’s interpretation of the interaction of the market reform rules and reimbursement of individual policies in Notice 2013-54, leading to a new temporary relief provision for premium reduction arrangements related to student health plans in Notice 2016-17.