It’s time for Congress to give small businesses healthcare choices now

ObamaCare never kept its promise to lower health insurance costs and provide more affordable choices for small businesses. Those who have been forced to buy insurance or an alternative plan because the coverage they liked was dropped or got more expensive are shelling out a lot of money for less coverage. To boot, super high out-of-pocket costs and thin networks are limiting access to care. Healthcare reform can’t come quick enough for entrepreneurs and their workforce.

Small businesses and the self-employed need more health coverage options. Choices have gotten worse, not better. That is why the third phase of the GOP’s American Health Care Act (AHCA) is critical. It aims to get the wheels of competition rolling. However, new and innovative choices in the insurance marketplace will take time. But small businesses want solutions now.

{mosads}For the near future, health insurance will continue to be costly. Even if the GOP healthcare plan passes, and premium costs go down by 10 percent (as estimated by the Congressional Budget Office), many small businesses will not be able to offer coverage. Make no mistake, a 10 percent move in the opposite direction is welcome news for small business owners who have only seen their costs spike upwards as far as they can remember. But a significant reduction in cost is needed to help the many self-employed and small businesses that have been priced out of the market long before ObamaCare.

Repealing ObamaCare’s individual and employer mandates and taxes, as the American Health Care Plan proposes, are welcome moves. Improving health savings accounts (HSAs) is also a positive reform. Still, small businesses need additional choices that give them flexibility and certainty.

As it was being implemented, ObamaCare took tax-free health reimbursement arrangements (HRAs) off the table as an option for small businesses and their employees. For a period of time, funding these accounts and reimbursing employees for their health insurance premiums or qualified medical expenses was an illegal act, amounting to fines of $100 per day per employee, upwards of $36,500 per-year.

Thankfully, the 21st Century Cures Act, signed by President Obama at the end of 2016, reinstated HRAs for small businesses under new rules. This was great news, but HRAs can be improved so that the self-employed can use them, and small businesses and their employees have full access to this option.

HRAs are flexible and generally easy for a small business to set up and administer. The business owner can determine benefit costs, the maximum amount of annual reimbursement employees will receive, and other elements such as allowable rollovers to the next year. The reimbursements are tax-deductible for the business and tax-free to employee.

But self-employed business owners, S corporation owners and partnerships are not eligible to participate in HRAs. This inequity negatively impacts millions of business owners and their employees. Small business owners can establish HRAs for their employees, yet they cannot participate themselves. (Unless they have a spouse who legitimately works for the firm as a W-2 employee and the policy is in his or her name.)

It doesn’t make sense to restrict the business owner’s access to this practical benefit. Ironically, HRAs come with non-discriminatory rules that basically state that the benefits must apply to all full-time employees — except, of course, the business owner cannot participate.

Expanding HRAs and allowing business owner participation would likely increase the number of small business employees receiving health coverage and financial assistance with qualified medical expenses. Again, there is no rationale for restricting company owner participation.

I understand the reasoning behind the three-stage approach to repealing and replacing ObamaCare. There are the political realities of Senate passage, and the rules of reconciliation do not allow certain legislative changes to be included.

That means legislation to support true competition, such as changes to facilitate a nationwide marketplace where small businesses can purchase coverage across state line, will have to move separately. The good news is that the House is already moving some of these bills.

Small business owners will understand the lag time involved in moving from the limited choices of ObamaCare to a more competitive marketplace. But expanding and improving HRAs will give them a practical option during the transition, and more people will have access to healthcare.

Karen Kerrigan is president and chief executive officer of the Small Business & Entrepreneurship Council. Follow her @KarenKerrigan.

The views expressed by contributors are their own and are not the views of The Hill.