I was reading a post over at Hot Air, Administration delays another Obamacare rule, this time for small businesses, when I realized there is still a lot of confusion over what HRAs are and how they pay for health care. HRAs were adopted by small businesses because the individual health insurance market had better prices than the group market. Small businesses really liked the idea that the employee could get the best bang for their health care dollar with a portable plan available in the individual insurance market while the business could take a health care tax deduction just like the big companies. As an example my 2014 HRA was funded at $500 per month. The HRA funding was adequate enough to reimburse me for my health insurance premiums, my out of pocket health care expenses, and to roll $3,000 over to 2015. I think everyone would agree that the ACA never intended to change HRAs. Due to misguided rulings by the IRS in 2014 we find that many HRAs are not in compliance with the ACA and small businesses are royally pissed! Small businesses who were nice enough to offer HRAs were hoping they can redo their HRA before they get penalized. As a last resort they could choose the safe alternative that is both bad for the company and the employee. As an example since my HRA is no longer being offered as a benefit, my company opted to give me a $500 per month raise. When you remove the payroll taxes from the raise, it is not enough to pay my 2015 health insurance premium. Both the company and I are paying more. The only beneficiary of this scheme is the government who is collecting higher payroll taxes. So it is not surprising that the IRS has decided to show leniency to the small businesses they just screwed. It was the least they could do! Last year H.R.5860 – Small Business Healthcare Relief Act of 2014 was introduced with bipartisan support to try and overcome the hardships the ACA inadvertently created for small businesses. Maybe it will pass in 2015 and small businesses can go back to growing their businesses.