Is Employee Who Pays After-Tax Premiums for On-Site Medical Clinic Providing Substantial Coverage in Nature of Medical Care an Eligible Employee?

[rocknrolls2]

Employer X allows vendor G to set up an on-site medical clinic on its premises. The services provided by the clinic are either borderline insignificant in the nature of medical care while other services constitute services that are significant in the nature of medical care. If Employer X decides not to pay premiums for the ability of its employees to access the clinic but allows its employees to pay premiums for access to the clinic on an after-tax basis. If an employee of X is covered by an HDHP and pays after-tax premiums for access to the clinic, is the employee an "eligible employee" who is able to make pre-tax contributions to an HSA?

[GBurns]

I would not use the term "eligible employee" in connection with HSAs.

You (and your spouse, if you have family coverage) generally cannot have any other health coverage that is not an HDHP. However, you can still be an eligible individual even if your spouse has non-HDHP coverage provided you are not covered by that plan.

The problem that I see is the scope of services provided by the clinic. See Q 10:

https://www.irs.gov/irb/2008-29_IRB/ar11.html#d0e929

[rocknrolls2]

Therefore, you would conclude that it does not make a difference if employees would be required to pay some or all of the premium for access to the clinic on an after-tax basis?

[leevena]

I am a little confused, sorry.

Why do you consider the payment to be a premium? As I read your post it states that an employer has allowed an outside vendor to set-up a medical clinic on the employers property. I suppose the clinic could set up a payment methodology based on either 1) pay for services, or 2) some form of capitation, but neither would be considered a premium.

What am I missing?

[rocknrolls2]

I was referring to some mechanism for charging for access to the clinic, which could include capitation or fee for services, which the employer chooses to pass on to employees in whole or in part. Clearly, the capitation method would allow for a more simple calculation of the total and could be spread out throughout the plan year, provided that capitation is either based on a total workforce at the job site basis or total number of enrolled employees.

[leevena]

My question revolved around your post stating the use of "premiums" as a way to for the employee to fund the costs. If I as an employee use the on-site medical provider and am presented with a bill for services, those expenses are eligible to be reimbursed through my participation in a 125 medical expense plan. There is no difference between that medical provider and any other. However, if you are looking to use some form of a capitation to fund the clinic, I doubt very much if the IRS would view this as an eligible expense, because it is not a "premium" for them.

[GBurns]

I think that whether the employee pays or not is irrelevant at this point. The issue is not the payment, but the services available at the clinic. To be an eligible individual for an HSA, an individual must be covered by an HDHP and by no other health plan that provides coverage other than disregarded coverage under § 223©(1)(B) or preventive care under § 223©(2)©. See Rev. Rul. 2004-45.

The IRS has taken the position that it is the scope of the services offered at the clinic that counts towards being "other coverage" . Having "other coverage" that could be counted towards the minimum deductible is not allowed. Since the clinic does offer such services it counts as "other coverage".

I suggest that you read through all the examples.