Jump to content

Is reimbursing employees’ individual health insurance premiums a group health plan?


Recommended Posts

Zane changes its position often and on many issues has been or is wrong. Anyone who feels that they should follow much of what is posted there, should get competent legal advice.

Additionally, many states small group/employer health insurance laws restrict or prohibit the reimbursement to the employee, in any manner. Also the individual health applications of the insurance carriers also prohibit or restrict the reimbursement.

So between IRS Notice 2013-54 and state small group laws and the insurance application, it seems difficult to do especially in small groups (up to 100 lives).

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

Link to comment
Share on other sites

GBurns, thank you for the observation about States' insurance laws.

For the situation you describe in which an individual must not receive a reimbursement from her employer, what happens when the insurer detects a prohibited reimbursement? Am I right in guessing that an insurer can't do anything to the employer (which is not a party to the individual contract)? Does the insurer have the remedy of rescinding the individual's contract? Does the insurer have any other remedy?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

Link to comment
Share on other sites

As far as I have been told by a number of legal people at a number of state DOI s, the insurer can rescind coverage and seek restitution. It is insurance fraud.

Under most state small group health insurance law, the reimbursement etc causes the arrangement to be subject to the state small group health laws, which in some cases do affect the employer.

Also, since the DOL has often and long opined that in many cases, the actions by the employer would have caused the arrangement to be treated as a group health plan and to fall under ERISA and HIPAA, there could and should be action against the employer.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

Link to comment
Share on other sites

Just received this press release and wanted to share it -- rejecting the assumptions behind the Zane Benefits product:

COMPLIANCE NOTICE: Individual Health Plans as Employee Benefits Under the Affordable Care Act (ACA)

Released on September 13, 2013, IRS Notice 2013-54 addresses the viability of individual health insurance plans as a tax-advantaged employee benefit under the Affordable Care Act (ACA). Unfortunately, the news was not good for employers wanting to offer such plans to their employees: the IRS determined that such plans are prohibited under the ACA.



While AmeriFlex is disappointed in the ultimate outcome of the Notice, keeping our brokers, clients, and partners in compliance with evolving regulations remains our top priority. As our team has received multiple inquiries requesting clarification of this issue, we would like to take this opportunity to provide some additional information that will hopefully help set the record straight.



The following arrangements and/or plans are now prohibited under the Notice:

Arrangements whereby an employer reimburses employees for individual health insurance premium payments (sometimes called "premium reimbursement arrangements").

Premium-only (or "POP") plans through which employees can pay for their individual health insurance on a pre-tax basis.

Any other arrangement or plan through which an employee's individual health insurance premium is reimbursed or subsidized by the employer in a tax-free (or otherwise "tax-favored") manner.

AmeriFlex has deemed the Notice unambiguous when it comes to its language on this subject. Our stance was confirmed by an IRS official who declared it "very clear" at the 2014 Annual Conference of the Employers Council on Flexible Compensation (ECFC). While we acknowledge that some regulations do leave room for more "aggressive" interpretations, this is not the case here. These sorts of arrangements and plans are strictly and explicitly prohibited under the ACA.



A few other misconceptions with regard to this issue have been brought to our attention since the release of the Notice, which we would also like to address:

The prohibition is NOT limited to individual health insurance plans sold on the "exchanges" or "marketplaces." It applies to ALL individual health insurance plans.

For the purposes of the ACA, these sorts of arrangements and/or plans are considered (pursuant to the Notice) to be "group health plans," even though they are comprised of individual health plans.

For the reason stated above, the ACA's prohibition on annual limits DOES apply to these arrangements and/or plans (which the Notice refers to collectively as "Employer Payment Plans").

AmeriFlex hopes this information is helpful to our clients and partners with regard to this critical issue. If you have any additional questions, or would like further clarification, you are welcome to contact our compliance team at compliance@flex125.com.



AmeriFlex Business Solutions

888.868.FLEX (3539)

www.flex125.com

Link to comment
Share on other sites

  • 1 year later...

Just curious if anybody has more recent thoughts or reflections on the Zane Benefits approach. I ran across the article linked below in the NY Times as well as some additional discussion around some of the later guidance from the IRS on these issues and more discussion on the Zane website but not sure there is anything new there. As noted in the article, much of this all seems to turn on the general ambiguity around whether premiums are an essential benefit and whether premium reimbursement arrangements could ever be designed to comply with the annual benefit limit issues, etc. As the NYT article notes--all this does seem "risky at best" but Zane is apparently continuing to aggressively market their approach.

Has anybody seen any sort of legal opinion in writing made available by Zane?

http://www.nytimes.com/2014/06/05/business/smallbusiness/taking-a-chance-on-a-health-insurance-strategy-the-irs-may-not-approve.html

Link to comment
Share on other sites

Thanks very much. That was my general sense as well; however, I understand the individual Zane points to as their legal counsel is a well-known, well-respected benefits lawyer with a large general practice firm. To the best of my knowledge, however, Zane has not been willing to share a written legal opinion or opinion letter from that law firm with their clients or helped facilitate a PLR or any sort of similar guidance on their specific arrangement from the IRS. Nonetheless, they are extremely confident that their plan works and have agreed (via email) to pay any fines that might arise in the event they are wrong. (Not sure what good that really does though if they turn out to be wrong and fold up when the house crumbles and everyone gets hit with fines.)

I don't think anyone on these boards can say definitively whether Zane is right or wrong as I think that turns on some pretty nuanced interpretations of the ACA regulations but, by the same token, I don't think it appropriate for Zane to project such confidence in their position at this stage. If they wish to successfully market these arrangements, I think the burden is on them to provide some express authority for their position.

Link to comment
Share on other sites

401 Chaos, thank you for your further observations.

Before an employer relies on an indemnity as a reason to take on risks, the employer might want advice about exactly which risks the indemnity responds to, and about whether the indemnity might be legally unenforceable.

If the employer knew or ought to have known that it was accepting legal advice from a non-lawyer, a court might be reluctant to enforce an indemnity promise that facilitates the non-lawyer's conduct of engaging in the unauthorized practice of law.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

Link to comment
Share on other sites

I see no nuances in the applciable laws. The IRC and CFR are both very clear on the issue(s).

Additionally, since most of the clients are small employers they would also fall under their state small group/employer health insurance laws. Almost every state prohibits the employer reimbursement of premium. This prohibition is also reflected in the individual health insurance application of every malor insurer.

So even without ACA, these small employers are not allowed, by state insurance law and the insurance contract, to reimburse the premiums paid by the employee.

The red herring which seems to be causing thoughts of "nuances" is the continued focus on ACA regulations especially in regard to "annual limits" and "excepted benefits. The ACA regulations change nothing relevant. The arguments posted on Page 1 of this thread are all still valid.

What many do not seem to realize is that the reimbursement under an "employer plan" was allowed by Treasury under Revenue Ruling 61-146 et al, not by IRC or CFR. Treasury can and now has effectively retracted Rev. Ruling 61-146 et al. There has been no change in applicable IRC or CFR which is why a Notice could be used. The issue is entirely at the discretion of Treasury.

Zane knows all of this but finds it easy to confuse the issues with red herrings and irrelevancies, since their clients are small businesses who do not have legal or tax advisors, but who rely on their agent.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

Link to comment
Share on other sites

Thanks. Didn't mean to suggest that the ACA issues were the only issues or concerns--just focused on those because Zane at least makes a vague nod toward trying to counter those concerns.

GBurns, just out of curiosity, have you seen Zane address the state prohibitions on employer reimbursement of individual policy premiums or do they just ignore that in hopes that their clients won't ask or be concerned?

Link to comment
Share on other sites

They either ignore or misrepresent the issues such as with Colorado and Oregon, which along with other states have also issued notices regarding the HHS and DoL positions, pre-ACA. which still stand.

Zane ignores the insurance law, HHS and DoL issues by keeping the argument on ACA and section 105. It is amazing that get away with inventing the term HRP and imply that it means something other than an HRA because it is a section 105 MERP. But, since they are in the small group/employer market, the employers do not have adequate legal advice.

I do not understand why brokers knowingly submit applications which have false statements. I do not think that they realize the potetntial consequences of claim denials and retroactive policy recission.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

Link to comment
Share on other sites

I bet the guys that took over the federal facility in Oregon have an attorney that backs their case. But most attorneys probably wouldn't agree with that particular interpretation.

I see Zane in the same vein.

No extra charge for the rhyme.

William C. Presson, ERPA, QPA, QKA
bill.presson@gmail.com
C 205.994.4070
Connect on LinkedIn

Link to comment
Share on other sites

  • 1 year later...

If an employer's arrangement to reimburse an eligible employee's payment of a premium for an individual health insurance contract follows all the rules and conditions for a qualified small employer health reimbursement arrangement ["QSEHRA"] described in Internal Revenue Code section 9831(d), the arrangement is not a group health plan for ERISA section 607(1) or 733(a)(1).

But do other ERISA issues remain?

Must a QSEHRA be stated by a written plan?

Must a QSEHRA's administrator furnish a summary plan description?

Must a QSEHRA's administrator adopt and follow a claims procedure?

What further issues should we think about?

 

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...