The below info is excerpted from a Zane Benefits information piece published Sunday, Sep 15, 2013. The entire technical discussion can be accessed at their RSS blog feed by clicking here. The essence of the discussion is that unlike what some major group insurance carriers have been indicating, newly stuctured HRP’s ( i.e., a limited healthcare reimbursement plan) can be used as the vehicle to shift employees from a group plan to individual purchases on exchanges. Wallgreens is the most recent large company to announce such a shift (click here for info on annoncement today 9/18/2013). IBM and Time Warner have made similar announcements.
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Now, the good news
Employers can still reimburse employees for individual health insurance premiums.
For the first time, the Department of Labor, the Department of Treasury, and Health and Human Services have coordinated to issue formal confirmation that employers are 100% allowed to reimburse individual health insurance premiums tax-free under the tax code. This is a MAJOR positive.
We repeat – employers are still allowed to reimburse employees tax-free for individual health insurance premiums.
What is the solution for plan years beginning on or after January 1st, 2014?
For plan years beginning on or after January 1st, 2014, the solution is to adopt a limited Healthcare Reimbursement Plan (HRP), such as ZaneHealth.
The HRP is structured to only reimburse:
- Health insurance premiums up to a specified monthly healthcare allowance,
- Preventative care as required by PHS Act Section 2713 at 100% without cost-sharing.
This structure ensures the HRP complies with the PHS Act 2711 annual limit requirements and the PHS Act 2713 preventative care requirements as outlined in the Technical Release.
Additionally, care must be taken in the design and administration of the HRP to ensure the plan does not meet the definition of an eligible employer-sponsored plan in IRC Section 5000A and consequently qualify as minimum essential coverage. This ensures employees participating in the HRP are able to receive a tax subsidy via the new health insurance marketplaces assuming they meet additional eligibility criteria.
Conclusion / Next Steps
With the Departments all in agreement, everyone should be excited there is finally a clean, final process for employers to reimburse employees for individual policies that are guaranteed-issue.
Sponsors of stand-alone HRAs should begin preparing to convert their plan to an HRP for plan years beginning after 2014.
Finally, our nation can rid itself of one-size-fits-all employer group health insurance policies that hamper businesses, employees and their families.
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