The federal government has guidelines for employers who want to contribute to an employee's individual health insurance premiums.  Specifically, the employer must take special steps to avoid "employer endorsement" of the individual plans.

To avoid endorsement of individual health insurance plans, compliance includes the following restrictions on the actions of employers:

1. Employers must not be involved in employees' decision to purchase individual health insurance, or their decision on which insurer or plan to use. They must not get involved in any negotiations with an insurance carrier over price or benefits of individual health insurance plans, and must not provide employees with claim forms or other materials related to their individual health insurance policies.
2. Employers may not directly pay premiums on individual health insurance policies. They must not receive any compensation from an insurance carrier in connection with an employee's individual health insurance policy.
3. Employers must not become involved in any claim dispute between an employee and an insurance carrier; all inquiries must be directed to the insurer.

To comply with point (1) above, while still making contributions to a defined contribution health plan that can reimburse for individual health insurance premiums, employers should follow these additional guidelines:

1. Employers must not pressure employees to use the defined contribution to pay for individual insurance coverage. 
2. In addition to reimbursing for health insurance premiums, employers should also allow the use of funds for qualified medical expenses.
3. Employers must limit their role to simply verifying that a qualified medical expense (such as an individual health insurance premium) was incurred, and then reimbursing such amount from the defined contribution.

See Why Can't Employers Pay For Its Employees' Individual Health Insurance Plans? for more information.

Click here to read more about defined contribution health plans.