[House Report 118-106]
[From the U.S. Government Publishing Office]


118th Congress }                                          { Report 
                        HOUSE OF REPRESENTATIVES
 1st Session   }                                          { 118-106

======================================================================
 
                     SMALL BUSINESS FLEXIBILITY ACT

                                _______
                                

 June 12, 2023.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

Mr. Smith of Missouri, from the Committee on Ways and Means, submitted 
                             the following

                              R E P O R T

                             together with

                            DISSENTING VIEWS

                        [To accompany H.R. 3798]

    The Committee on Ways and Means, to whom was referred the 
bill (H.R. 3798) to amend the Internal Revenue Code of 1986 to 
inform employers of flexible health insurance benefits, having 
considered the same, reports favorably thereon with an 
amendment and recommends that the bill as amended do pass.

                                CONTENTS

                                                                   Page
  I. SUMMARY AND BACKGROUND...........................................2
          A. Purpose and Summary.................................     2
          B. Background and Need for Legislation.................     2
          C. Legislative History.................................     3
          D. Legislative History.................................     3
 II. EXPLANATION OF THE BILL..........................................3
III. VOTE OF THE COMMITTEE............................................4
 IV. BUDGET EFFECTS OF THE BILL.......................................4
          A. Committee Estimate of Budgetary Effects.............     4
          B. Statement Regarding New Budget Authority and Tax 
              Expenditures Budget Authority......................     5
          C. Cost Estimate Prepared by the Congressional Budget 
              Office.............................................     5
  V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE.......5
          A. Committee Oversight Findings and Recommendations....     5
          B. Statement of General Performance Goals and 
              Objectives.........................................     5
          C. Information Relating to Unfunded Mandates...........     5
          D. Congressional Earmarks, Limited Tax Benefits, and 
              Limited Tariff Benefits............................     5
          E. Tax Complexity Analysis.............................     5
          F. Duplication of Federal Programs.....................     6
 VI. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED............6
          A. Changes in Existing Law Proposed by the Bill, as 
              Reported...........................................     6
VII. DISSENTING VIEWS.................................................8

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Small Business Flexibility Act''.

SEC. 2. NOTIFICATION OF FLEXIBLE HEALTH INSURANCE BENEFITS.

  (a) In General.--Subchapter C of chapter 100 of the Internal Revenue 
Code of 1986 is amended by adding at the end the following new section:

``SEC. 9835. NOTIFICATION OF FLEXIBLE HEALTH INSURANCE BENEFITS.

  ``(a) In General.--Not later than 1 year after the date of enactment 
of this section, the Secretary shall notify employers of the 
availability of tax-advantaged flexible health insurance benefits, with 
an initial focus on small businesses.
  ``(b) Definitions.--In this section:
          ``(1) Employer.--The term `employer' has the meaning given 
        such term in section 3(5) of the Employee Retirement Income 
        Security Act (29 U.S.C. 1002(5)).
          ``(2) Flexible health insurance benefits.--The term `flexible 
        health insurance benefits' means--
                  ``(A) an individual contribution health reimbursement 
                arrangement (as described in the rule entitled `Health 
                Reimbursement Arrangements and Other Account-Based 
                Group Health Plans' (84 Fed. Reg. 28888 (June 20, 
                2019));
                  ``(B) a qualified small employer health reimbursement 
                arrangement (as defined in section 9831(d)(2)); and
                  ``(C) the small employer health insurance credit 
                determined under section 45R.''.
  (b) Clerical Amendment.--The table of sections for subchapter C of 
chapter 100 of such Code is amended by adding at the end the following 
new item:

``Sec. 9835. Notification of flexible health insurance benefits.''.

                       I. SUMMARY AND BACKGROUND


                         A. Purpose and Summary

    The bill, H.R. 3798, the ``Small Business Flexibility 
Act,'' as ordered reported by the Committee on Ways and Means 
on June 7, 2023, to require the Treasury Department to notify 
businesses of the various flexible coverage options available 
to them, including CHOICE Arrangements, Qualified Small 
Employer Health Reimbursement Arrangements, and the Small 
Business Health Care Tax Credit.

                 B. Background and Need for Legislation

    Small businesses currently have access to a variety of tax-
advantaged health benefit policies. 26 CFR 54.9802-4 
established the Individual Coverage Health Reimbursement 
Arrangement (ICHRA), which allows businesses the option to 
offer their employees tax-exempt, defined contributions to 
purchase qualified health insurance on the individual market. 
Similarly, Qualified Small Employer Health Reimbursement 
Arrangements (PL 114-255) allows small businesses with fewer 
than 50 employees the option to offer their employees tax-
exempt, defined contributions to purchase qualified health 
insurance on the individual. Additionally, the Small Business 
Health Care Tax Credit (PL 111-148) allows small businesses 
with fewer than 25 employees to claim a tax credit to cover up 
to 50% of the cost of a qualified health plan for a two year 
time period. Unfortunately, surveys show 70% of small 
businesses do not know these flexible health care coverage 
options exist. Legislation is needed to help inform small 
businesses of the flexible, tax-advantaged coverage options 
available to them.

                         C. Legislative History


Background

    H.R. 3798 was introduced on June 5, 2023, and was referred 
to the Committee on Ways and Means.

Committee hearings

    On Thursday, March 23, 2023, the Ways and Means 
Subcommittee on Health held hearing on ``Why Health Care is 
Unaffordable: The Fallout of Democrats' Inflation on Patients 
and Small Businesses''.

Committee action

    The Committee on Ways and Means marked up H.R. 3798, the 
``Small Business Flexibility Act,'' on June 7, 2023, and 
ordered the bill, as amended, favorably reported (with a quorum 
being present).

                         D. Legislative History

    Pursuant to clause 3(c)(6) of rule XIII, the following 
hearings were used to develop and consider H.R. 3798:
    (1) Committee on Ways and Means Committee on Ways and Means 
Subcommittee on Health ``Why Health Care is Unaffordable: The 
Fallout of Democrats' Inflation on Patients and Small 
Businesses''.

                      II. EXPLANATION OF THE BILL


         A. Notification of Flexible Health Insurance Benefits
           (sec. 2 of the bill and new sec. 9835 of the Code)


                              PRESENT LAW

    Under present law, there is no requirement for the Treasury 
to notify employers of the availability of tax-advantaged 
flexible health insurance benefits.

                           REASONS FOR CHANGE

    The Committee observes that 70 percent of small businesses 
are not aware of flexible health coverage options including 
individual contribution health reimbursement arrangements, 
qualified small employer health reimbursement arrangements, and 
the small employer health insurance credit and that only 31 
percent of small businesses with less than 50 employees offer 
health insurance to their employees. The Committee believes 
that establishing an outreach program to businesses, with a 
focus on small businesses, providing information about such 
flexible health coverage options would increase their 
utilization.

                        EXPLANATION OF PROVISION

    Under the provision, not later than one year after the date 
of enactment, the Secretary is required to notify employers\1\ 
of the availability of tax-advantaged flexible health insurance 
benefits, with an initial focus on small businesses. For 
purposes of the provision, flexible health insurance benefits 
include: (1) an individual contribution health reimbursement 
arrangement;\2\ (2) a qualified small employer health 
reimbursement arrangement;\3\ and (3) the small employer health 
insurance credit.\4\
---------------------------------------------------------------------------
    \1\As defined in section 3(5) of the Employee Retirement Income 
Security Act of 1974 (``ERISA''), Pub. L. No. 93-406, Sept. 2, 1974.
    \2\As described in the rule entitled ``Health Reimbursement 
Arrangements and Other Account-Based Group Health Plans,'' T.D. 9867, 
84 Fed. Reg. 28888, June 20, 2019.
    \3\As defined in sec. 9831(d)(2).
    \4\Determined under section 45R.
---------------------------------------------------------------------------

                             EFFECTIVE DATE

    The provision is effective on the date of enactment.

                       III. VOTE OF THE COMMITTEE

    Pursuant to clause 3(b) of rule XIII of the Rules of the 
House of Representatives, the following statement is made 
concerning the vote of the Committee on Ways and Means in its 
consideration of H.R. 3798, the ``Small Business Flexibility 
Act,'' on June 7, 2023.
    The bill, H.R. 3798, the ``Small Business Flexibility 
Act,'' as amended, was ordered favorably reported to the House 
of Representatives by a roll call vote of 36 Yeas to 3 Nays 
(with a quorum being present). The vote was as follows:

----------------------------------------------------------------------------------------------------------------
         Representative             Yea       Nay     Present     Representative      Yea       Nay     Present
----------------------------------------------------------------------------------------------------------------
Mr. Smith (MO).................        X   ........  .........  Mr. Neal.........  ........  ........  .........
Mr. Buchanan...................        X   ........  .........  Mr. Doggett......  ........        X   .........
Mr. Smith (NE).................        X   ........  .........  Mr. Thompson.....        X   ........  .........
Mr. Kelly......................        X   ........  .........  Mr. Larson.......        X   ........  .........
Mr. Schweikert.................        X   ........  .........  Mr. Blumenauer...        X   ........  .........
Mr. LaHood.....................        X   ........  .........  Mr. Pascrell.....  ........        X   .........
Dr. Wenstrup...................        X   ........  .........  Mr. Davis........        X   ........  .........
Mr. Arrington..................        X   ........  .........  Ms. Sanchez......  ........  ........  .........
Dr. Ferguson...................        X   ........  .........  Mr. Higgins......        X   ........  .........
Mr. Estes......................        X   ........  .........  Ms. Sewell.......        X   ........  .........
Mr. Smucker....................  ........  ........  .........  Ms. DelBene......  ........  ........  .........
Mr. Hern.......................        X   ........  .........  Ms. Chu..........  ........        X   .........
Ms. Miller.....................        X   ........  .........  Ms. Moore........        X   ........  .........
Dr. Murphy.....................        X   ........  .........  Mr. Kildee.......        X   ........  .........
Mr. Kustoff....................        X   ........  .........  Mr. Beyer........        X   ........  .........
Mr. Fitzpatrick................        X   ........  .........  Mr. Evans........        X   ........  .........
Mr. Steube.....................        X   ........  .........  Mr. Schneider....        X   ........  .........
Ms. Tenney.....................        X   ........  .........  Mr. Panetta......        X   ........  .........
Mrs. Fischbach.................        X   ........  .........
Mr. Moore......................        X   ........  .........
Mrs. Steel.....................        X   ........  .........
Ms. Van Duyne..................        X   ........  .........
Mr. Feenstra...................        X   ........  .........
Ms. Malliotakis................        X   ........  .........
Mr. Carey......................        X   ........  .........
----------------------------------------------------------------------------------------------------------------

                     IV. BUDGET EFFECTS OF THE BILL


               A. Committee Estimate of Budgetary Effects

    In compliance with clause 3(d) of rule XIII of the Rules of 
the House of Representatives, the following statement is made 
concerning the effects on the budget of the bill, H.R. 3798, as 
reported.
    The bill is estimated to have no effect on the Federal 
fiscal year budget receipts for the period 2023 through 2033.

            B. Statement Regarding New Budget Authority and
                   Tax Expenditures Budget Authority

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
bill involves no new or increased budget authority. The 
Committee states further that the bill involves no new or 
increased tax expenditures.

                    C. Cost Estimate Prepared by the
                      Congressional Budget Office

    The Committee has requested but not received from the 
Director of the Congressional Budget Office a statement as to 
whether this bill contains any new budget authority, spending 
authority, credit authority, or an increase or decrease in 
revenues or tax expenditures.

     V. OTHER MATTERS TO BE DISCUSSED UNDER THE RULES OF THE HOUSE


          A. Committee Oversight Findings and Recommendations

    With respect to clause 3(c)(1) of rule XIII of the Rules of 
the House of Representatives, the Committee made findings and 
recommendations that are reflected in this report.

        B. Statement of General Performance Goals and Objectives

    With respect to clause 3(c)(4) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that the 
bill does not authorize funding, so no statement of general 
performance goals and objectives is required.

              C. Information Relating to Unfunded Mandates

    This information is provided in accordance with section 423 
of the Unfunded Mandates Reform Act of 1995 (Pub. L. No. 104-
4).
    The Committee has determined that the bill does not contain 
Federal mandates on the private sector. The Committee has 
determined that the bill does not impose a Federal 
intergovernmental mandate on State, local, or tribal 
governments.

  D. Congressional Earmarks, Limited Tax Benefits, and Limited Tariff 
                                Benefits

    With respect to clause 9 of rule XXI of the Rules of the 
House of Representatives, the Committee has carefully reviewed 
the provisions of the bill, and states that the provisions of 
the bill do not contain any congressional earmarks, limited tax 
benefits, or limited tariff benefits within the meaning of the 
rule.

                       E. Tax Complexity Analysis

    Pursuant to clause 3(h)(1) of rule XIII of the Rules of the 
House of Representatives, the staff of the Joint Committee on 
Taxation has determined that a complexity analysis is not 
required under section 4022(b) of the IRS Reform Act because 
the bill contains no provisions that amend the Internal Revenue 
Code of 1986 and that have ``widespread applicability'' to 
individuals or small businesses, within the meaning of the 
rule.

                   F. Duplication of Federal Programs

    In compliance with clause 3(c)(5) of rule XIII of the Rules 
of the House of Representatives, the Committee states that no 
provision of the bill establishes or reauthorizes: (1) a 
program of the Federal Government known to be duplicative of 
another Federal program; (2) a program included in any report 
from the Government Accountability Office to Congress pursuant 
to section 21 of Public Law 111-139; or (3) a program related 
to a program identified in the most recent Catalog of Federal 
Domestic Assistance, published pursuant to the Federal Program 
Information Act (Pub. L. No. 95-220, as amended by Pub. L. No. 
98-169).

             VI. CHANGES IN EXISTING LAW MADE BY THE BILL,
                              AS REPORTED


      A. Changes in Existing Law Proposed by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (new matter is 
printed in italics and existing law in which no change is 
proposed is shown in roman):

                     INTERNAL REVENUE CODE OF 1986




           *       *       *       *       *       *       *
Subtitle K--Group Health Plan Requirements

           *       *       *       *       *       *       *


CHAPTER 100--GROUP HEALTH PLAN REQUIREMENTS

           *       *       *       *       *       *       *


                    Subchapter C--GENERAL PROVISIONS

Sec.
9831. General exceptions.
     * * * * * * *
9835. Notification of flexible health insurance benefits.

           *       *       *       *       *       *       *


SEC. 9835. NOTIFICATION OF FLEXIBLE HEALTH INSURANCE BENEFITS.

  (a) In General.--Not later than 1 year after the date of 
enactment of this section, the Secretary shall notify employers 
of the availability of tax-advantaged flexible health insurance 
benefits, with an initial focus on small businesses.
  (b) Definitions.--In this section:
          (1) Employer.--The term ``employer'' has the meaning 
        given such term in section 3(5) of the Employee 
        Retirement Income Security Act (29 U.S.C. 1002(5)).
          (2) Flexible health insurance benefits.--The term 
        ``flexible health insurance benefits'' means--
                  (A) an individual contribution health 
                reimbursement arrangement (as described in the 
                rule entitled ``Health Reimbursement 
                Arrangements and Other Account-Based Group 
                Health Plans'' (84 Fed. Reg. 28888 (June 20, 
                2019));
                  (B) a qualified small employer health 
                reimbursement arrangement (as defined in 
                section 9831(d)(2)); and
                  (C) the small employer health insurance 
                credit determined under section 45R.

           *       *       *       *       *       *       *


                         VII. DISSENTING VIEWS

                          House of Representatives,
                               Committee on Ways and Means,
                                      Washington, DC, June 7, 2023.

        DISSENTING VIEWS ON THE SMALL BUSINESS FLEXIBILITY ACT,
                               H.R. 3798

    H.R. 3798 (Rep. Tenney, R-NY) requires the United States 
Department of Treasury (Treasury) to educate employers about 
certain tax-preferred health accounts that could be offered to 
employees: (1) an individual contribution health reimbursement 
arrangement; (2) a qualified small employer health 
reimbursement arrangement; or (3) the small employer health 
insurance credit. This legislation provides no additional 
resources for Treasury to conduct this education campaign.
    Consumers need better tools and unbiased information. This 
legislation directs the Treasury Secretary to educate employers 
about various tax-preferred arrangements and accounts. However, 
employers offering these arrangements or accounts could 
inadvertently cause employees to be worse off because, if an 
employer offers the account, a low-income employee could be 
barred from accessing more affordable, subsidized marketplace 
coverage. In any education campaign, the Secretary should 
ensure materials directed at employers clearly explain how to 
determine whether any employees would be disadvantaged by the 
offering of such tax-preferred item.
    The intersection between what health insurance an employer 
offers employees, affordability, and access to subsidized 
marketplace coverage is complex and confusing. Some tax-
preferred arrangements will block an employee from subsidized 
marketplace coverage because the value of the arrangement is 
deemed affordable even if it leaves a significant cost burden 
on the worker. Consumers often have difficulty navigating 
whether their offer of employer health insurance coverage is 
``affordable'' or whether they are eligible to get subsidized 
coverage in the ACA marketplaces. Calculating affordability and 
understanding whether health insurance coverage meets minimum 
standards are not straightforward and consumers often do not 
have all the necessary information to make this determination. 
Navigating and overcoming the affordability test can be 
particularly problematic for lower-wage workers who may face 
high costs for employer coverage but, due to rules around 
employer health insurance offerings and affordability, cannot 
access premium tax credits in the Marketplace that would make 
their health insurance coverage cheaper.
    To better assist consumers and help employers ensure that 
an offer of coverage does not inadvertently make their workers 
worse off, Treasury should tailor educational materials to 
clearly explain these issues. It is important for employers to 
understand how offering some of these accounts could bar 
employees from better assistance in the marketplace and a more 
complete understanding of all their health options.
                                           Richard E. Neal,
                                                    Ranking Member.

        Ranking Member Richard E. Neal, Opening Statement, 
            Committee on Ways and Means Markup of H.R. 
            3798,
                                           Wednesday, June 7, 2023.
    I support employers looking to understand what the best 
coverage options are for their employees. However, it's equally 
important that consumers understand the health insurance 
options available to them. That's why I'm disappointed in this 
process. This is a simple reporting bill. It shouldn't be 
partisan. But instead of working with us, the Republicans gave 
us no opportunity to provide input or work together on this 
legislation.
    Simply notifying businesses about the availability of items 
like individual contribution health reimbursement arrangements, 
qualified small employer health reimbursement arrangements, or 
the small employer health insurance credit is insufficient. We 
ought to provide small businesses with information about what 
could be best for their employees. I'm disappointed that 
Republicans didn't give us the opportunity to help craft this 
legislation to ensure employers understand how to offer these 
arrangements in a way that doesn't make their employees worse 
off.
    Some tax-preferred arrangements can block an employee from 
subsidized marketplace coverage. We know that far too many 
employees, particularly low-wage workers, face very high costs 
for employer coverage but due to a quirk in the affordability 
test, they cannot access subsidized coverage in the 
Marketplace. Determining whether an employee cannot access 
subsidized marketplace coverage is complex. It is important for 
Treasury to educate employers on these facts too, so that well-
meaning employers don't inadvertently offer a product or 
subsidy that leaves their workers worse off by locking them out 
of assistance in the Marketplaces.
    Secondly, we should be look at providing assistance to 
employees to understand how to navigate the complex interaction 
of health care and the tax code. We need to give consumers 
better tools and unbiased information to make informed 
decisions about which coverage is best for them.
    My colleague, Mr. Kildee, has long been interested in 
better funding and expansion of health insurance navigators, 
who could take on that role. I think that is something the 
Committee should consider and I hope we can work on that 
legislation this Congress. We need to help ordinary Americans 
make these choices, not just businesses. Unfortunately, we 
weren't given the opportunity to offer any input and improve 
access to information for employees. I would hope we can do 
better in the future.
    Thank you and I yield back.

                                  [all]