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

Is the End of Employer Provided Health Insurance Around the Corner?

Frequent readers are familiar with the fact that many analysts believe health-care reform will drive businesses to drop medical benefits for their employees.  The argument is that it will be a better financial deal for staff to acquire insurance on the Marketplace than for the employer to continue to pay for coverage.

This is because ACA subsidizes the individual for the cost of health insurance but most businesses do not receive any type of assistance.  It’s true that some employers get the benefit of the Small Business Health Care Tax Credit.  But because of the particular rules associated with the credit, others won’t see the value.

A recent article by Kaiser Health News profiles the changing dynamics of the health-care landscape.  It describes the circumstances of a small Atlanta-based restaurant chain that moved its managers to the Marketplace from employer-based coverage. The economics of ACA meant that it was much more expensive to leave them on the open market instead of allowing the government to subsidize the cost.

From the article:

“I had a lot of regrets going into it,” Dunn, who owns three Italian Oven restaurants in suburban Atlanta, said of his decision. “I don’t think I have as many now — only because I’ve seen the affordability factor for my managers improve.”

With subsidies factored in along with unrelated pay increases, the managers “are going to be saving money out of the deal” while getting coverage comparable to what they had before, Dunn said. “My managers actually got excited about it because they’re saving money on their health Book-Best-of-2014insurance.

The question remains how quickly, and how broadly, this change will take place. I highly recommend reading the best selling book, “The End of Employer-Provided Health Insurance.” by Paul Zane Plizer & Rick Lindquist

If you are employer and would like to see what options are now available, give us a call directly at 909-570-1103

Sticker Shock? A Solution for Small Business Health Insurance Rate Hikes

At renewal time this year, many small businesses will face sticker shock at the new rate hikes for group health insurance in 2015. Many small businesses are seeking cost-mitigation strategies to deal with the premium increases this year. A popular solution among small and medium-sized businesses is switching employees to individual health insurance and reimbursing them for their premiums.

The Rising Cost of Group Health Insurance

The costs are becoming unsustainable for small businesses and their employees. Small business health insurance costs have nearly doubled since 2009, with 91 percent of small businesses reporting increases in their health plan at their most recent health insurance renewal.

Costs continued to rise in 2014. In fact, the Kaiser Family Foundation’s annual Employer Health Insurance Survey (2014) revealed that the cost of group health insurance for family coverage has risen 26 percent in the last five years and 69 percent in the last ten years. Family_Coverage_Employee_Contribution

Chart: Kaiser Family Foundation
The Kaiser survey also revealed that small businesses are less likely to offer health benefits to their employees. Among the small businesses who reported not offering benefits in 2014, cost was the primary reason.

It looks like these rate hikes will continue in 2015. According to the preliminary survey results from Mercer’s National Survey of Employer-Sponsored Health Plans, group health insurance rates will rise by an average of 3.9 percent in 2015– and that’s if the businesses make significant changes to their existing plans.


According to the survey, the projected increase actually reflects cost-mitigating actions the businesses will take. If the businesses make no changes to their existing plans, projected costs would rise 5.9 percent on average.Projected_Healthcare_cost_increase

Chart: Mercer

The Solution for Sticker Shock

Small businesses can mitigate their group health insurance costs with a simple solution: not renewing their group health insurance plan; however, dropping health benefits altogether is not a feasible option for many small businesses or their employees. Many small businesses are considering adopting a premium reimbursement plan to offer health benefits to recruit and retain top talent.

By setting up a premium reimbursement plan, small businesses reimburse employees tax-free for individual health insurance policies. Businesses fix their costs on a monthly basis, and employees can choose a health insurance policy that best meets their health and financial needs.

Additionally, individual health insurance costs up to 60 percent less than group health insurance, making premium reimbursement is an effective solution for businesses who wish to cut down on healthcare costs for their employees.

To set this up, the business first needs to decide how much they will contribute toward employees’ health insurance expenses. This allowance, or “defined contribution,” can be the same for all employees, or it can differ depending upon employee class and/or family status.

To remain in compliance with regulations regarding these reimbursements, businesses should use reimbursement software to help make administration of the plan easy

With the cost of group health insurance renewals on the rise, businesses are facing enormous cost challenges and are seeking cost-effective alternatives to group health insurance. The emerging solution is premium reimbursement for individual health insurance.


How Obamacare Is Failing Young Entrepreneurs

As an entrepreneur and small business owner for most of my life. I understand the challenges involved with being self-employed. The new ACA (Obamacare) has called a whole new challenge for small business owners. That challenge is is called “out-of-pocket expenses” this is great story by Amanda Glassman. Give us call if you like to learn how to prevent some of these “out-of-pocket” expenses.


Just last month I turned 26. It’s a momentous occasion for any adult: you receive that five-year reunion email from your alma mater, realize you’ve been an adult longer than you were an adolescent. Your life is now, undeniably, in your own hands. You lose your parents’ health insurance.

As a writer who has opted out of a traditional career path, it is even more terrifying. As a young woman prone to full-body, tonic-clonic seizures, it is unbearable. Because creative types, aspiring young entrepreneurs, people taking the path less traveled aren’t covered by employee benefits. They’re on their own. Enter Obamacare. The solution to the problem of underinsured Americans… right? For $95 dollars a month, you can have access to hospitals, doctors, important prescription medications. You’re safe. For $200 a month? Why, you’re practically golden.

Screech to a halt in front of the Rite Aid pharmacy counter. Labor Day. 10 a.m. The $510 bill for Lamictal boring a hole through my skull. Those dull, echoing words: “your insurance doesn’t cover this medication.” Lamictal, the generic drug used not only to treat epilepsy, but bipolar disorder, PTSD. It’s the drug that my doctor, the Head of Neurology at NYU medical center, prescribed as the best anti-epileptic medication on the market. It’s a generic, all-pervasive pharmaceutical drug. Everybody uses it.

If Anthem Blue Cross had a headquarters, you can bet your top dollar I would have been camped out in front of there that Monday morning. Maybe with a picket sign. Maybe just with the very long, very depressing receipt. Instead, I waited impatiently until the next day. And even more impatiently on the phone for an hour that next morning. And again, those soul-draining words: “Your medication is not covered.”

See, the sneaky thing is, lamotrigine is written in black and white, right there on the approved prescription drugs page on my provider’s website. I know. I checked. I checked before I wrote the check for $200 a month for their Gold Plan, and again after. Just to be sure. Just because I was terrified of what would happen if I had chosen the wrong plan. Because I couldn’t afford not to have it covered. Yet from outside the medical field, I wasn’t informed enough to know that, golly gee, the covered medication was for something called tabs, not the Extended Release formula that I need. To keep me seizure-free. To allow me to drive my car. To allow me to leave my house. To allow me the peace of mind to swim in the ocean with my friends on a California weekend.

So here I am, 26 and paying out-of-pocket nearly more than I make in a week because a leading insurance provider, on an expensive Gold-Level plan, cannot give me the medication I need. In a country priding itself on innovation, we’re doing a hell of a job making sure our young adults can take the risks necessary to push our country forward. So we can have those non-profit organizations, the iPhone apps, the car-sharing websites that make our lives easier and more streamlined. The innovation that we say sets America apart. So, the health care problem is not over. And at 26? It’s just getting started.