A House Republican committee chairman wrote to the Obama administration on Tuesday to decry a part of the president’s health law that prevents businesses from offering a more generous health package to executives than to lower-paid workers.
Rep. Sam Graves, Missouri Republican and chairman of the Committee on Small Business, said the provision will eliminate a type of leverage some companies use to bring in top-tier managers.
“Small businesses need strong leadership if they want to succeed, and they often do not have an established reputation,” the letter to the Treasury Department and Internal Revenue Service said. “Superior benefits are one tool that small firms can employ to attract and retain talented executives.”
Mr. Graves argued it is customary for companies to provide their top officers with non-taxable health insurance as part of their benefits package. Under the law, small employers who do not comply are subject to penalties of $100 per day per employees “who is deemed discriminated against,” the letter said.
According the letter, the administration established the prohibition among companies with self-funded health plans prior to the enactment of the Affordable Care Act. But the health care law extended the non-discrimination clause to employer-sponsored group health plans.
The impact of the provision on the latter group has been delayed, while the IRS rolls out regulations on how the rule would apply.
Meanwhile, Mr. Graves said he is hearing from small employers who “are very concerned that unless existing fully insured group plans are grandfathered, the operation of the new non-discrimination provisions may result in a small business’s health plan being found to be discriminatory and the bus to incur substantial penalties.”
The letter was sent out one day before Mr. Graves holds a hearing on how Mr. Obama’s health care law will affect small businesses.