The word is out: individual health insurance is a great alternative to group health insurance—especially for employees of small and midsize businesses. One reason is the cost: according to a 2014 analysis of S&P 500 companies, employers could save nearly $700 billion in the next decade by transitioning employees to individual coverage in the public exchanges or private market. That’s a huge incentive for employers to eliminate their group plans.
But because individual health insurance isn’t as widely used as group health plans, there are misconceptions about it. Some people think employees with individual coverage have been thrown to the wolves by their employers, and left to finance their own plans. And employers often believe they aren’t allowed to help employees pay for individual insurance.
Reimbursement vs. Additional Compensation
According to the IRS (Notice 2013-54), employers can’t reimburse the purchase of an individual policy without that policy being considered a group health plan, and therefore subject to the applicable ACA regulations. Reimbursement, in this case, is referring to giving the employee the money specifically to buy health insurance and requiring a receipt of purchase in order to get the money. Employers cannot reimburse employees for the cost of insurance in the individual market, but there are ways to help their employees pay for individual health plans without being penalized or running afoul of the ACA.
Gravie allows employers to give employees additional post-tax wages or compensation that can either be applied toward the cost of an individual health insurance plan or taken in cash. The employee is free to do whatever he or she wants with the extra compensation—the key to making the program compliant with the ACA.
We’ve worked with some of the best benefit and tax lawyers in the country to ensure this process so our customers are compliant with all applicable rules and regulations. We will continue to do this as the market changes.
A Better Health Benefit
In addition to helping employees sort through all the plan options available to them, Gravie also takes care of getting the money from employers to insurance companies once employees select their plans.
Employees still consider health insurance a core component of their benefits package—the 2013 Mercer Workplace Survey found that 93% say their health benefits are as important as their salaries. Individual health insurance, with additional wages from employers and a team to support employees better than ever—in both their shopping and to help with any related issues year-round—is a great way to ensure employees’ healthcare needs are being met.