H.R. 5447 would amend the Internal Revenue Code to define a qualified small employer health reimbursement arrangement (QSEHRA) as an arrangement where an employer pays directly for or reimburses medical expenses of an employee and his or her dependents. In order to be eligible for this arrangement, an employer must generally have had fewer than 50 full-time employees during the prior year. An employee must provide proof of having minimum essential health insurance coverage, as defined for purposes of the individual mandate. The payments from an employer provided through a QSEHRA would not be counted in the employees’ gross income and would therefore be exempt from income taxes. An employer that offered a QSEHRA would not be subject to penalties under the Internal Revenue Code, the Employee Retirement Income Security Act of 1974, or the Public Health Service Act that typically apply to group health plans that fail to meet certain requirements.
The staff of the Joint Committee on Taxation (JCT) estimates that enacting H.R. 5447 would raise both revenues and outlays by $363 million over the 2016-2026 period. JCT therefore estimates that enacting the bill would have no effect on federal budget deficits over the 2016-2026 period. The change in revenues includes an increase of $157 million in off-budget revenues (from Social Security payroll taxes). As a result, on-budget deficits are expected to increase by $157 million over the 2016-2026 period.
The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting revenues or direct spending. The net changes in revenues and direct spending that are subject to those pay-as-you-go procedures are shown in the following table. Only on-budget changes to revenues and direct spending are subject to pay-as-you-go procedures.