Employer-Provided Health Benefits – Section 105 Healthcare Reimbursement Plans

Employer-provided health benefits are changing in America, especially for small businesses. Group healthcare costs continue to rise. Annual premiums for group policies have increased over 180 percent in the last 15 years, with the average coverage cost per family expected to reach $20,000 by 2016.

As such, many employers have stopped providing group healthcare policies entirely. The Wall Street Journal recently reported that the implementation of the Affordable Care Act prevents pre-existing conditions from being factored into policy prices, eliminating several incentives for small businesses to even offer group plans. In fact, the percentage of small to medium employers offering health benefits to their employees dropped 11 percent from 2010 to 2013.Employer-Provided Health Benefits

The drop in group coverage has led some employees to the individual market where they can select and purchase healthcare coverage that best suits their needs.

Employer-Provided Health Benefits Are Still an Option

Section 105 Healthcare Reimbursement Plans (HRPs) are available to employers to reimburse qualified health insurance premiums.

This gives small business owners an opportunity to offer employer-provided health benefits to their employees without purchasing a group health insurance plan. Employees purchase the individual insurance that best suits them, and the HRP reimburses the cost of the premium up to the specified allowance.

How Does an HRP Work?

HRPs offer tax free dollars to reimburse employees for their premium expenses. It is one of several premium reimbursement options.

Employers select the specified monthly healthcare allowance available to employees, and the plan reimburses employees when they submit documentation showing that they have paid their health insurance premiums.

Is an HRP a Compliant Form of Employer-Provided Health Benefits?

Yes. When designed and administered correctly, HRPs comply with all applicable IRS, HIPAA, COBRA, ERISA, and ACA rules.

One of the biggest questions is how HRPs comply with the ACA’s “Market Reforms.” In order to comply with the Market Reforms, HRPs must be structured to comply with PHS Act Section 2711 annual limit rules and PHS Act Section 2713 preventive care rules.

PHS Act Section 2711 requires group health plans (including HRPs) not to place annual or lifetime limits on “essential health benefits.”

PHS Act Section 2713 requires group health plans (including HPRs) to cover basic preventive care services without cost-sharing.

It is important to note that PHS Act Section 2711 allows group health plans (including HRPs) to place annual limits on benefits that are not essential health benefits. Since health insurance premiums are not essential health benefits, group health plans (including HRPs) may place a “premium-specific” annual limit on premium reimbursements.

However, group health plans (including HRPs) may not place an annual limit on the basic preventive care expenses required by PHS Act Section 2713 because preventive care expenses are considered essential health benefits.

As such, one way to structure a compliant HRP is to design the arrangement to reimburse employees for health insurance premiums up to a specified monthly healthcare allowance, and preventive care as required by PHS Act Section 2713.

Employer-provided health benefits are viable in conjunction with individual insurance, and it is important to understand the fundamentals surrounding healthcare reimbursement plans as more and more employers drop group coverage.

Original article posted by our partner, Zane Benefits: http://www.zanebenefits.com/blog/employer-provided-health-benefits-section-105-healthcare-reimbursement-plans

Large Employers Shifting Healthcare Costs to Employees

There have been many people that have told me, “…I am not affected by Affordable Care Act(Obamcare), because I have health insurance from my job.”

However, the trend we are starting to see is that large employers are shifting Healthcare coast to employees. This will start becoming more poplar as large employees start to see how to reduce their cost. Here is great story by Abbey Rosenberg.


Lately, there has been a trend among large employers who have reported considering shifting employees to private exchanges as a cost-mitigation strategy. However, preliminary results from a survey conducted by the National Business Coalition on Health and Benz Communications revealed that a majority of large employers surveyed rejected this idea. This article contains an overview of the preliminary results from the Inside Benefits Communication Survey.

Background on the Inside Benefits Communication Survey

The 2014 Inside Benefits Communication Survey was conducted by the National Business Coalition on Health and Benz Communications. The goal was to learn more about how companies are strategizing their benefits to comply withAffordable Care Act (ACA) compliance issues.

The survey polled 333 human resources and healthcare benefits professionals about their communications approaches, strategies, and results. While the survey spanned across the nation in a variety of industries, there were a significant number of respondents in the technology and service industries. In addition, respondents were located mainly in the Southeast and West regions of the United States.

Employers Are Not Looking to Private Exchanges

The preliminary results from the survey revealed that employers are rejecting the notion of moving their employees to a private exchange as a cost-mitigation strategy. Although this trend has been expressed in similar industry polls, 55 percent of the respondents reported that they will not stop sponsoring employee health insurance to sponsor coverage through a private exchange.

Other large employers did report interest in shifting employees to a private exchange:

  • Almost one-third (32 percent) of employers are considering moving to a private exchange within the next three to five years
  • Eight percent are planning a move to a private exchange within the next year
  • Five percent already use a private exchange to provide employee health benefits

Some Employers to Increase Employee Contributions

HR/benefits professionals were asked about whether they will maintain current benefit plans and coverage levels and whether costs would shift to employees. The results were that:

  • 40 percent will maintain current coverage levels without increasing employee costs
  • 32 percent will maintain current benefit and coverage levels, but will increase employee costs

Respondents were asked how their company will prepare to comply with the ACA “Cadillac tax” in 2018. The Cadillac tax is an excise tax on high cost health insurance plans offered by employers The results were as follows:

  • 26 percent plan to maintain current benefit plans and coverage levels without increasing employee costs
  • Almost 20 percent plan to maintain benefit levels, but will increase employee costs
  • 15 percent will reduce plan benefit and coverage levels while still increasing employee costs

Read the Inside Benefits Communication Survey from the National Business Coalition on Health and Benz Communications.