Small-business owners are descending on Washington this week to lobby Congress to roll back an ObamaCare rule that could hit companies with thousands of dollars’ worth of penalties.
About 150 small-business owners, organized by the National Federation of Independent Business (NFIB), will head to Capitol Hill on Thursday to make the case to members from their states on legislation that would change the rule.
At issue is a 2013 ruling from the IRS that imposes steep penalties on employers who offer tax-free reimbursement to their employees to help them purchase individual health insurance plans. The IRS ruled that such Health Reimbursement Arrangements (HRAs) violate ObamaCare requirements that forbid limits on the coverage of essential benefits and require preventive services to be covered for free.
Businesses that continue offering such arrangements are now subject to an excise tax of $36,500 per employee per year.
The business community argues the penalty punishes small businesses that can’t afford employer-sponsored coverage and are trying to provide some financial help to their employees.
“This is a brand-new penalty that nobody knew about, and it’s huge,” said Jack Mozloom, an NFIB spokesman.
He said small businesses are trying to help their employees with healthcare costs and “their thanks for doing so is a big fat fine.”
Larger businesses have also been pushing against the rule. The Council for Affordable Health Coverage, whose members include health insurance companies and the U.S. Chamber of Commerce, has been meeting with the relevant committees in Congress for legislation rolling back the rule.
“We’re getting good vibes from everyone,” said Joel White, the council’s president. He added that he thinks the legislation will be “on the short list before the end of the year.”
The legislation, the Small Business Healthcare Relief Act, has bipartisan support and has been introduced in both chambers.
It is sponsored by Sens. Chuck Grassley (R-Iowa) and Heidi Heitkamp (D-N.D.), and Reps. Charles Boustany Jr. (R-La.) and Mike Thompson (D-Calif.).
The bill would allow businesses with fewer than 50 employees to offer HRAs without a penalty. Supporters note that businesses with fewer than 50 employees are not subject to the law’s mandate that employers provide insurance.
“The fact that it’s got bipartisan and bicameral support bodes well for an opportunity to move this thing forward,” Boustany said.
He said it is likely to be taken up by the House Ways and Means Committee after lawmakers’ August recess. “There’s great interest on our Ways and Means Committee in the bill,” he said.
Boustany questioned Treasury Secretary Jack Lew about the rule at a hearing in February.
Lew at the time expressed openness to revisiting the rule. “Our objective and the objective of the Affordable Care Act is to make sure that affordable healthcare is available to all, and I believe that the provisions that you’re referring to are not consistent with that,” Lew said. “I’d be happy to follow up with you.”
Later that month, the Treasury Department delayed the penalty for violating the rule until July 1, but that date has now passed, and the rule is in effect.
On Wednesday, a Treasury Department spokesman pointed out that small businesses have other options. They can purchase insurance through the health law’s Small Business Health Options Program, which offers tax credits to help with premium costs. The official also said that employers could give their workers a bonus, giving them the option to spend it on healthcare or not.
Opponents of the rule are painting it as a test of whether President Obama is true to his word that his administration is open to common-sense improvements to the healthcare law.
“If he has ever been sincere about his willingness to fix parts of the law that don’t work well, he should be willing to sign that legislation,” said Mozloom of the NFIB.
An NFIB survey found that 14 percent of small businesses not offering health insurance did offer some sort of reimbursement to their employees.
Heitkamp portrayed the bill as an improvement to the law that makes sense.
“I have long said some parts of the health care reform law work,” she said in a statement earlier this month. “But we need to improve the pieces that should work better for families and small businesses — and this bill continues those efforts.”