Cafeteria Plan and Health Insurance

[msmith]

A Company sponsors a Cafeteria Plan, with only health and dependant care reimbursement. Outside the Cafeteria Plan, the Employer provides Group Health Insurance with a $5.00/per pay co-pay for the employee and the employee can elect to cover spouse and dependants. The employee pays for any spouse or dependant coverage and this is deducted from pay (post tax).

My question is - can the employee be reimbursed, from the Cafeteria Plan, for the co-pay and dependant coverage?

[Lori Friedman]

The health FSA can't reimburse employees for insurance premium payments [Prop. Reg. Sec. 1.125-5(k)(4)]. But, the cafeteria plan sponsor can add a plan provision to have the premium amounts withheld on a pre-tax basis. This type of provision is often called a POP ("premium only plan" or "premium only provision").

[J Simmons]

A Company sponsors a Cafeteria Plan, with only health and dependant care reimbursement. Outside the Cafeteria Plan, the Employer provides Group Health Insurance with a $5.00/per pay co-pay for the employee and the employee can elect to cover spouse and dependants. The employee pays for any spouse or dependant coverage and this is deducted from pay (post tax).

My question is - can the employee be reimbursed, from the Cafeteria Plan, for the co-pay and dependant coverage?

The health flex account can be tapped for reimbursement of the co-pays.

[LRDG]

Co-pays are not typically deducted 'per pay' from pay checks.

Co-pay is typically a percentage of the cost of the covered medical expense a medical insurance policy requires to be paid by the insured, with the remaining amount paid by the policy. For example a policy might require co-pay of 80%-20% co-pay, meaning the insured is required to pay 20% of the cost, the policy co-paying the remaining 80%.

The co-pay might be eligible for reimbursement from a medical FSA, assuming the procedure is eligible.

The contributory cost of medical insurance premiums is usually paid through the premium conversion feature of a Sec. 125 plan.

Typically, the premium cost for spouse and dependent/s coverage is also eligible for payment through the premium conversion feature of a Sec. 125 plan.

[msmith]

The co-pay is not the co-pay that you normally see on an EOB. It is a payroll deduction.

[QDROphile]

The "co-pay" appears to be simply the employee share of the health coverage cost. A cafeteria plan works only with a choice of cash or benefit. The plan can be amended to provide that if the employee elects health coverage, the employee's pay will be reduced by $5 per period and the employee will be provided with the coverage. The $5 "co-pay" cannot be paid from the health spending account because it is a premium for health coverage. I agree with Lori Friedman.

[GBurns]

msmith

What do you mean by "reimbursed, from the Cafeteria Plan" ?

I also have a problem with what you call a "co-pay". A co-pay is that amount that you pay the Dr, pharmacy or other service provider each visit eg $20 per Drs office visit. It is never a payroll deduction.

What the rest of us call co-pays are usually reimbursed from the FSA which is a part of some cafeteria plans, but you apparently do not have this feature.

Post tax insurance premiums are reimburseable by a cafeteria plan but not through the FSA feature.

What is usually done is that through a cafeteria plan the employee elects to have the employee share of the selected insurance premium deducted on a pre-tax basis and sent to the insurance company.

See LRDGs response.

[J Simmons]

Yes, msmith, my answer was based on the terminology, "co-pay", as described by George Burns.

[msmith]

It is not a true co-pay in the sense of the word. It is classified as such on the payroll records. It is the employee's portion of the health insurance premium.

Further, the Employer has been reimbursing, through the FSA, the dependant premiums, COBRA payments (for a spouse) and the above referenced $5.00 premium. If these are not expenses that can be reimbursed, how do they correct for a prior plan year?

Thank you!!

[J Simmons]

To correct for past years' improper payments from a flex account, you should see a benefits and compensation attorney.

[GBurns]

This is a classic reason against the self-administration of employee benefits plans.