A recent press release from the National Federation ofIndependent Business (NFIB) noted that, "Under Obamacare,individuals face a penalty for not buying health insurance. Butnow, even small businesses that choose to jump through hoops tohelp workers pay for healthcare costs could pay penalties."

In the past, business owners who did not offer group healthinsurance were able to reimburse their employees tax-free forindividual health insurance policies.

Recently, though, the IRS has begun prohibiting thesereimbursement arrangements. In specific, a new IRS regulation thatwent into effect on July 1 could impose a fine of $100 a day perworker (up to $36,500 per employee per year), and up to a total of$500,000 per business, for businesses that provide tax-freeassistance with workers' individual health insurance premiums ormedical costs.

"The regulation would cost businesses over 18 times more thanthe Obamacare penalty for larger businesses not providing healthinsurance for employees, which is $2,000," said Kevin Kuhlman,director of legislative affairs for NFIB.

Why would the PPACA encourage the IRS to do this? Actually, thePPACA had and has nothing to do with it. In fact, the IRS ruleactually appears nowhere in the PPACA. It is a separate IRS rulethat was created independent of the PPACA and was set to takeeffect July 1 of this year. "It's hard the believe Congress or thePresident intended to punish employers much more severely foractually helping their workers," said Kuhlman. "Nevertheless,that's the consequence, and most businesses don't know it."

According to NFIB research, one in seven (14 percent) of smallbusinesses not offering group health insurance has these policiesin place. "They think they're doing a good thing, but they'rewalking into a minefield," said the press release. "With employersnow no longer being able to provide these reimbursements, the newIRS regulation could mean cost increases for hundreds of thousandsof workers."

"There is no real justification for penalizing small businessesthat do what the law's strongest supporters claim to want, which isto help employees obtain coverage or pay medical bills," saidKuhlman. "This is a rigid and thoughtless bureaucratic rule thatundermines the purpose of the law, and it ought to be repealedimmediately."

The penalty even kicks in for businesses with fewer than 50employees who are exempt from being required to establish groupplans under the PPACA, and who were told repeatedly that the PPACAwould not affect their businesses. "Small businesses with too fewresources to set up group healthcare plans could still faceinsurmountable fines for providing for their workers' well-being,"said the press release.

"The penalty for compensating employees for healthcare-relatedexpenses is enough to destroy most small businesses," said Kuhlman."Reimbursing employees for the cost of insurance or medicalservices is a way for small businesses to help their workers,without the administrative headaches of setting up a costly groupplan. Most small employers don't have HR departments or benefitsspecialists, so this is a simpler, easier way to help theiremployees."

Fortunately for small business, legislation has been introducedinto both houses of Congress (S.1697 and H.R.2911) to address thisnew, and potentially expensive, problem for small businesses.