Health Coverage Reimbursement Arrangements

April 30th, 2015

Healthcare reimbursements to employees

In the wake of the implementation of the Affordable Care Act (ACA) many employers have either started, or are entertaining the idea of starting, a policy to reimburse their employees for the cost of their individual health insurance in lieu of having a group health plan.  What many don’t know is that under the ACA, employer payment plans are considered group health plans that will fail to comply with the market reforms (yes this even applies if you are reimbursing an employee for an approved individual plan purchased through Blue Cross and other applicable carriers).  In failing to comply the employer may be subject to an excise tax of $100 per day per applicable employee.  This excise tax could be as much as $36,500 per year, per applicable employee.


Even though this change and its resulting penalties went into effect January 1, 2014, a recent ruling has provided relief for all employers with less than 50 FTEs until June 30, 2015, After, June 30th all employers regardless of size could be subject to the penalty.


In addition to consulting with your accountant and legal counsel, ELM would recommend that an employer eliminate all appearances of a plan.  The employer should not offer any type of direct pay or reimbursement of an employee’s premium without risking a penalty.  Instead an employer should either establish a group plan that is in keeping with ACA requirements (Blue Cross, United Healthcare, etc..) or simply pay the employee additional compensation without any requirement that the additional pay be used to pay for health insurance. The employee must be free to use the additional compensation in any manner they choose.

If you would like additional information or assistance in obtaining a group health plan, please contact us @ (251) 470-0700.

Your Staff @ ELM


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