Non profit Hosp, discount medical services?

[Guest latwz]

Hi,

Is it legal for a hospital offer a discount/reimbursement to employees on physician services rendered to said employees children? This would be in addition to a 50% reduction of the remaining balance of hosptial charges after insurance?

Thanks

[jmor99]

I don't see why not. After all, it's a non-profit! Seriously, why can't any provider or manufacturer give whatever discount it wishes to employees (assuming the board of directors or stockholders don't complain)?

Perhaps these additional discounts could be seen as extensions of the health plan. In which case they could be conceived of as MORE than "de minimis" fringe benefits. Interesting question. In the past I doubt the IRS would have been interested. However, in the current climate wherein non-profits are starting to be questioned about their non-profit status because of price gouging, maybe they would.

[leevena]

You need to provide more information, but my initial reaction is yes it can. It sounds like the hospital is providing the employees with an employee benefit, which happens to be the funding of services. This would be similar to a restaurant offering a discount on meals to their employees.

Like any other company that offers an employee benefit, the question then becomes, "is the employer doing it correctly?" Did the company adopt the benefit, communicate it, apply it properly, etc. If they did, then it appears that it is ok.

Good luck.

[GBurns]

leevena points out that it will be a question of "is the employer doing it correctly?". but there might be more to this issue than those things listed.

This discount is being given only to children. Nothing is being given to other dependents such as spouses. Nothing is being given to employees who have no children or who cannot afford family or dependent coverage. The discount will only be given to those who have children AND who can afford to have family or dependent coverage. To some this means that the employees most in need will not benefit whereas those who can already afford more will get more benefit.

Could this be regarded as being discriminatory? Could this raise 105(h) and other issues?

I guess more information really is needed.

[Guest latwz]

Hi,

Thank you for your reponnses. I will ty and clarify some questions raised.

First, this is a children's hospital and we rarely treat adults.

Second, we offer a 50% discount on any remaining balance after insurance for all employees/spouse's and dependents. Which is in line with other hospitals.

However, we would also like to offer a 50% reimbursement on physician charges, after insurance. This is the sticky point. The physician would get paid in full and the Hospital would reimburse the EE for 50% of the invocie, after insurance. Would this be OK?

I have looked and cannot find anything on the subject either that or I am looking in the wrong place. Any comments would be appreciated.

Thank you

[leevena]

Sounds like you are self-funding an employee benefit that allows the employee to pay only half of the physician charges. This is ok, but as I said earlier, make sure you have structured the plan correctly, including documents, communication, discrimination, etc.

[GBurns]

It looks like what you have is a simple section 105 Medical Expense Reimbursement Plan. You should be looking at the Treas Regs 1.105 in particular and Rulings related to these. Where have you been looking?

[Guest mjb]

Why is the hospital reimbursing the employee 50% of the amount paid to the doctor instead of having the employee pay 50% of the cost and the hospital paying the other 50% directly to the Doc from its funds to avoid any 105 issues or issues under 409A as a deferred comp plan. Is there some tax issues or other law which prevents payment to the doc by the H? How would the hospital reimbursement to the employee be characterized for tax purposes? Why wouldnt it be reported as income?

[oriecat]

Just curious, since this is new to me... when doing the 50% discount, do you have to make sure that it isn't more than 20% of the total bill, so that it still qualifies for exclusion from wages? Would that ever be an issue?

[Guest latwz]

Thank you all again. I am reasonably new to this type of benefit and I appreciate your input.

I think the reimbursement would be considered wages and I think the hospital would treat it as such, but would that be the only issue, except documentation, communitcation, etc?

Again, I appreciate the thought provoking comments.

[Kirk Maldonado]

You need to look into whether providing that benefit might affect the hospital's tax-exempt status.

[GBurns]

oriecat

Why 20%?

latwz

Why would the reimbursement of an identifiable and substantiated medical expense be wages? From your figures I did not see any amounts that were excess reimbursements.

You might be anle to get some thoughts from a somewhat relevant PLR such as PLR 19915054.

[oriecat]

oriecat

Why 20%?

Well that's what the IRS says in Pub 15-B...

http://www.irs.gov/publications/p15b/ar02.html#d0e1188

Exclusion from wages. You can generally exclude the value of an employee discount you provide an employee from the employee's wages, up to the following limits.

* For a discount on services, 20% of the price you charge nonemployee customers for the service.

Is there some reason this wouldn't apply in the above case? Is this discount somehow different?

[GBurns]

But in this case the employee is being reimbursed for a medical expense. It is not the employer discounting an employer service or item which is what I think 15B refers to. It is the physicians etc who will be invoicing the employee and providing the service (item) at the rate available to the "public". The employer will not have any input into what the physician charges and the employer will be providing nothing and invoicing (charging) nothing.

[oriecat]

I got the impression that there are two separate issues - the reimbursement on physician charges and a 50% discount on remaining hospital charges... but I could very well be confused

[Guest latwz]

There are two separate benefits, but only one issue. The first benefit is a 50% reduction on all hospital charges, excluding certain charges i.e. RX, the other benefit, which is the issue, is a reinbursement for physician changes, which are not hospital charges. The physician charges after all insurance payments. These physicans are not hosp. ee's, just have privledges here. The hospital wants to offer this as a benefit, but one of our managers think it would cause a problem, but doesn't know why. I am just trying to find out. Thanks again for all of the info.