An employer health care arrangement is an agreement by the employer to contribute to employees' health care costs.
Introduction to Health Care Arrangements
There are several types of employer health care arrangements, ranging from a formal health plan to an informal arrangement to help with employees' health care costs.
Employers use employer health care arrangements either as a stand-alone health benefit or as a supplemental health benefit, integrated with a group health insurance plan.
For example, with a stand-alone arrangement, the employer might reimburse for individual health insurance premiums as an alternative to a group health insurance plan. Whereas with a supplemental arrangement, the employer might reimburse employees for health care expenses not covered by the insurance plan -- such as dental, vision, or deductible expenses.
Types of Health Care Arrangements
A few common types of health care arrangements include:
- Health Reimbursement Arrangements
- Healthcare Reimbursement Plans
- Employer Payment Plans
- Medical Reimbursement Plans
While each of these plans are referred to as a health care arrangement, they are set up and structured very differently. Which brings us to the importance of compliance.
Importance of Compliance with Health Care Arrangements
With any type of health care arrangement, compliance should be top-of-mind. That's because there are several federal and Affordable Care Act rules governing how employers reimburse employees for individual health insurance and health care expenses tax-free. To be offered tax-free, the arrangement needs be structured to comply with IRS, HIPAA, ERISA, and ACA rules.
For example, if an employer establishes a reimbursement arrangement that fails to comply with the Affordable Care Act Market Reforms, the employer may be subject to a $100/day excise tax per applicable employee. This underscores the importance of ensuring compliance with the Market Reforms when reimbursing employees for individual health insurance and/or out-of-pocket health care costs. Read more about compliance here.
5 Questions to Ask about Health Care Arrangements
As you can see, the term "employer health care arrangements" is often used broadly; used to describe different types of arrangements.
To understand and evaluate an employer health care arrangement, here are five questions to ask:
Is there a formal health plan in place? If yes, how is the plan structured?
What type of health care costs will be reimbursed?
Will it be offered as a stand-alone health benefit, or along side a group health insurance plan?
Will reimbursements be tax-free?
Does the plan comply with federal regulations, including the ACA's Market Reforms?
What questions do you have?