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Employer-Paid Individual Insurance Policy


Guest mel_2_22
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Guest mel_2_22

I am looking for cases, (as well as one in particular that I heard happened in Ohio) where employers paid the premiums for individual insurance policies.

Is it permissable to allow the reimbursement of individual insurance premiums through an HRA that also can be used to reimburse qualified medical expenses? I had read in an EBIA manual that this should be permissable, but was wondering if there was currently any litigation on it. I had heard of a case in ohio.

Any help on this would be greatly appreciated!

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The premiums for individual policies listing the employee as the owner may be a proper expense reimbursable under an HRA, unless the HRA document prohibits that.

However, individual policies often do not include group health plan requirements, and may pose problems for the employer to comply with HIPAA, COBRA, PDA '78, etc. If a required coverage is not provided by the individual policy, is the employer liable to cover the expense? Probably.

There is a very narrow opportunity to design a payroll reduction policy that meets IRC 125 but does not rise to the level of a 'group health plan' for the definitions of HIPAA, COBRA, PDA '78, etc. However, that would provide a tax benefit only if the employee bears the expense, not the employer as is the case in an HRA.

John Simmons

johnsimmonslaw@gmail.com

Note to Readers: For you, I'm a stranger posting on a bulletin board. Posts here should not be given the same weight as personalized advice from a professional who knows or can learn all the facts of your situation.

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Mel

I assume that the individual policy is a health insurance policy.

Why individual and not group?

What do the other employees who are in the same class get?

Who is getting billed by the insurance company?

Is the employer going to pay directly to the insurance company or will the employer be reimbursing the employee what the employee paid?

Is an HRA the only available payment channel?

Also I wondered why cases were important rather than regulations etc, since it is quite likely that most conflicts involving this issue were settled without litigation.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Guest mel_2_22
Mel

I assume that the individual policy is a health insurance policy.

Why individual and not group?

What do the other employees who are in the same class get?

Who is getting billed by the insurance company?

Is the employer going to pay directly to the insurance company or will the employer be reimbursing the employee what the employee paid?

Is an HRA the only available payment channel?

Also I wondered why cases were important rather than regulations etc, since it is quite likely that most conflicts involving this issue were settled without litigation.

Yes, the individual policy is a health insurance policy. The reason that one of our clients was looking for individual instead of group is that it is considerably cheaper. It is a small group (less than 20 people). The employer would not be offering group health insurance. They would only offer the HRA, and allow the reimbursement of individual insurance policies as well as qualifying medical expenses. The individuals themselves would be billed for the insurance, and the employer would reimburse them through the HRA upon proof of payment.

The reason why I was looking at cases is because someone mentioned a particular case where it did reach litigation. I had read in EBIA and some other reg. publications that were cited that this type of arrangement should be permissable. I just wanted to see what types of circumstances in these types of arrangements had triggered litigation in the past, to see if those types of situations would apply to us.

I had read a lot in EBIA's manuals about this, and it seemed to me that it should be permissable, as long as the HRA is not designed to exclusively allow the reimbursement of idnvidual health insurance premiums, and that if it were designed to reimburse other qualifying medical expenses, it should be okay.

EBIA Excerpt: CDHC, pg. 1224 "HRAs Designed to Reimburse Both Individual Insurance Premiums and Other Medical

Expenses

While there is no formal guidance on the issue, it would seem that an arrangement that allows for

reimbursement of not only individual policy premiums, but also any other Code § 213(d) medical expenses (e.g., out of pocket expenses for eyeglasses, office visits, and copays) may be permissible, since all employees would have an equal opportunity to use the full amount of reimbursements available under the employer’s HRA"*

* Treas. Reg. § 54.9802-l(b)(2)(i), Example 8; DOL Reg. § 2590.702(b)(2)(i), Example 8, HHS Reg. § 146.121(b)(2)(i), Example 8.

Am i interpreting this correctly, or am i missing something here?

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Mel:

Thanks for clarifying the situation.

Yes, I believe you would be okay, in that the employer does not have a group plan.

If he had a group plan, you may have problems taking some of those off the group, and putting them on less expensive individual policies.

I assume there is no carryover provision for the HRAs?

If there was, those who didn't use the expenses could carry them over to the following year (cumulatively, if more than one year was involved, with no concerns about discrimination, if the amounts yearly were equal).

Don Levit

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