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Small Business Employee Benefits and HR Blog

Tax Free Individual Health Insurance in Florida Using HRAs, POPs and Payroll Reimbursement Arrangements

HRAs, POPs and tax free individual health insurance are 100% allowed in Florida if administered the correct way.tax free insurance in Florida

Nothing in Florida insurance code restricts an employer (small or large) from offering HRAs and POPs that reimburse individual health insurance plans. HRAs and POPs are federal plans that are not regulated by the Florida Department of Insurance.

However, there exists confusion with regard to the state insurance code that regulates insurance companies insuring small employers (i.e. companies with 2-50 employees). It is important to realize that the insurance code applies to insurance companies and does not restrict a small employer from offering employees the ability to reimburse themselves for individual health insurance costs tax free.

According to Florida Insurance Code Section 627.6699:

627.6699

Employee Health Care Access Act.—

(4) APPLICABILITY AND SCOPE.—

(a)(1.) This section applies to a health benefit plan that provides coverage to employees of a small employer in this state, unless the coverage is marketed directly to the individual employee, and the employer does not contribute directly or indirectly to the premiums or facilitate the administration of the coverage in any manner. For the purposes of this subparagraph, an employer is not deemed to be contributing to the premiums or facilitating the administration of coverage if the employer does not contribute to the premium and merely collects the premiums for coverage from an employee's wages or salary through payroll deduction and submits payment for the premiums of one or more employees in a lump sum to a carrier.

(2.) A carrier authorized to issue group or individual health benefit plans under this chapter or chapter 641 may offer coverage as described in this paragraph to individual employees without being subject to this section if the employer has not had a group health benefit plan in place in the prior 6 months. A carrier authorized to issue group or individual health benefit plans under this chapter or chapter 641 may offer coverage as described in this subparagraph to employees that are not eligible employees as defined in this section, whether or not the small employer has a group health benefit plan in place. A carrier that offers coverage as described in this subparagraph must provide a cancellation notice to the primary insured at least 10 days prior to canceling the coverage for nonpayment of premium.

Individual policies reimbursed by ZanePOP cannot be made subject to the requirements of Section 627.6699 because, with ZanePOP:

  1. The employer does not pay a portion of the premium or benefits for the individual health insurance policy.
  2. The employer does not facilitate the administration of the indivudal health insurance policy in any way (all policies are marketed directly to the individual employee).

The employer does not reimburse the employee for any portion of the premium.

The non-applicability of 627.6699 to individual policies reimbursed by ZanePOP should be straightforward. Please post questions in the comment section.

Similarly, individual policies reimbursed by ZaneHRA cannot be made subject to the requirements of Section 627.6699 because, with ZaneHRA:

  1. The employer does not pay a portion of the premium or benefits for the individual health insurance policy.
  2. The employer does not facilitate the administration of the individual health insurance policy in any way (all policies are marketed directly to the individual employee).
  3. The employer makes contributions to the ZaneHRA plan, and employees choose whether to use the dollars for to reimburse eligible medical items.

In other words, the ZaneHRA is the employer-sponsored “plan", and the medical items (e.g. pharmacy, insurance policy costs, doctor visits, etc.) for which each employee voluntarily chooses to seek reimbursement from the plan are not considered part of the plan.

The federal government has guidelines for employers who want to allow insurers or their representatives access to their employees without triggering ERISA plan status and the associated liabilities. ZaneHRA is designed to comply with these guidelines.

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 an HRA that can reimburse for individual health insurance premiums, employers must follow these additional guidelines:
  1. Employers must not pressure employees to use the money in their HRA to pay for individual insurance coverage. Employers may require HRA participants to have health insurance coverage to participate in their HRA provided this requirement is waived for participants medically unqualified to obtain health insurance (e.g. rejected, uprated, excluded).
  2. In addition to reimbursing for health insurance premiums, employers should also allow the use of HRA funds for qualified medical expenses.
  3. Employers must limit their role to simply reimbursing qualified medical expenses as directed by the ZaneHRA plan.
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