Myth: It’s Simple to Manage Individual Health Insurance for Employees In-House
Transitioning employees from an employer-sponsored health insurance plan to the individual health insurance market seems like a simple switch. Drop your group plan, give your employees a set amount of money that they may choose to use towards health insurance costs, and wash your hands of insurance plan administration.
Done and done. Or, are you? Not quite.
Sure, there are plenty of reasons why dropping your group plan in favor of the individual health insurance market makes sense for you and your employees. But, as an employer, there are some legal and logistical considerations to keep in mind:
- Coordinating payments to employees for their individual health insurance plans may put you afoul of the ACA.
Like many employers, you may be tempted to reimburse employees for their health insurance costs in order to simplify the process. It may seem easier, but the IRS says that reimbursement arrangements do not satisfy the market reforms. Violations could result in stiff penalties.
What’s the problem with doing this?
1. Requiring a receipt of purchase from your employees in order for them to receive their money to help pay for their plan creates a reimbursement arrangement. By doing so, you’re inadvertently creating a group health plan and this group plan you’ve created doesn’t meet ACA requirements.
2. On top of reimbursing, if you’re giving employees this money pre-tax, you’re violating more rules from the IRS.
3. If you’re simply giving employees additional salary to help them pay for individual coverage, then great! But, if you do this, the money cannot be contingent on the purchase of a plan and you must offer a “cash out” option. This means employees must be able to take the amount you’re offering in cash, and not use it towards health insurance.
4. You, as an employer, cannot be involved in your employees’ management of individual health coverage. If you are, you’re violating a Department of Labor safe harbor rule that keeps your arrangement from being considered a group health plan. This means that you’re not allowed to answer health insurance questions on behalf of your employees or give them advice on shopping and choosing their plans.
- Your employees have no support when it comes to plan selection and management.
Since you cannot help employees with their individual health insurance, they have no one to turn to with questions besides the health insurance company’s customer service.
Suddenly, that seemingly simple insurance transition has real life consequences. Fortunately, this is one of the reasons why we started Gravie.
With Gravie, employers can give their employees additional compensation that they can use toward health insurance. With this approach, payments are not considered reimbursement and employers are compliant with the ACA’s rules regarding reimbursement. Plus, we help get this additional compensation to employees each month so you don’t have to worry about it.
In addition, Gravie’s team of advisors handle employees’ needs and questions. They offer unbiased support throughout the life of your employees’ plans and tackle health insurance-related problems and questions of any size or complexity.
Gravie provides everything you need to make your transition to individual health insurance a success before, during, and after it happens.
Have other questions you’d like us to answer? Call us at 844.540.8701, fill out our employer form, or tweet us at @gogravie.