Obama administration delays penalties for HRAs

The rollout of the Patient Protection and Affordable Care Act's various coverage mandates related to businesses has been rocky to say the least, and has consequently faced numerous delays. Now, another one of those holdups – which may or may not be beneficial to some smaller businesses – has been announced.

Specifically, the Internal Revenue Service and U.S. Department of the Treasury announced that companies who offer their employees' health reimbursement arrangements (HRAs), spending accounts used by employers to provide their workers pre-tax dollars to cover a portion of the cost of buying health insurance, rather than traditional coverage, would not face financial penalties in the near future, according to a report from the Washington Post. Instead, those fines would be levied later this year, and the idea behind the delay is that this will give companies more time to find reasonable alternatives that will work for both workers and their own bottom lines.

How costly would the penalties be?
The fact of the matter is that these fines are likely to be hefty when they are applied, and could be crippling to some companies, especially those which may have only introduced HRAs because they didn't think they could afford to offer more traditional health insurance options, the report said. Employers who engage in this kind of health care help can be fined by as much as $100 per employee for every day those people go without coverage that fits into the government mandate. For example, if a company with 10 employees is hit with that type of fine for just one week, that's $1,000 per day for five days. Obviously, that kind of cost can add up quickly.

The move was welcomed by small business advocacy groups, which still say there is much about Obamacare implementation over the last few years that needs to be revisited, the report said. For instance, Amanda Austin, the vice president of public policy for the National Federation of Independent Business, told the newspaper that this kind of protection for small businesses is necessary to insulate them from costly penalties while they continue to search for alternatives, but that more needs to be done down the road as well.

This delay might provide an extra window for health insurance companies to reach small businesses in particular. Working with such companies could go a long way toward helping them find more affordable coverage options for their employees, while also boosting enrollment on their own end.