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Small Business Employee Benefits and HR Blog

Can We "DIY" Health Insurance Reimbursement?

Can We "DIY" Health Insurance Reimbursement?To compliantly reimburse employees for health insurance premiums, employers often choose to use a Healthcare Reimbursement Plan (HRP). With an HRP, employers can customize a plan that fits their company’s needs while ensuring compliance with federal requirements. However, we are often asked, “Can we do this ourselves?” The answer is, technically yes. However, the compliance requirements for health insurance reimbursement can be difficult to navigate and cause unnecessary administrative burdens.

If a company does choose to “Do It Yourself” and self-administer health insurance reimbursement, health reimbursement software provides assurance in the following areas.

Plan Design

When designing a tax advantaged reimbursement plan, it must comply with the Internal Revenue Code while also satisfying the Affordable Care Act’s “Market Reforms.” Here’s how an HRP plan design complies:

Internal Revenue Code

Designed under Internal Revenue Code (IRC) § 105, an HRP allows employers to reimburse employees for their qualified medical expenses, as defined by IRC § 213(d). This includes health insurance premiums and certain preventive services.  

Affordable Care Act

The application of the Affordable Care Act (ACA) provided additional requirements for group health plans, including § 105 plan designs. These requirements, known as the “Market Reforms,” prohibit both lifetime and annual limits on essential health benefits and require certain preventive services to be covered without cost-sharing. An HRP complies with these requirements by only allowing reimbursement for health insurance premiums (not an essential health benefit), and certain preventive services (without cost-sharing).

Administration

When administering a reimbursement plan, considerations must be made to ensure compliance with certain requirements enforced by ACA, ERISA, HIPAA, and COBRA. Using an HRP software, such as ZaneHealth, allows administrative compliance without extensive training or dedicated time requirements. Here are some ways that using software accounts for these administrative requirements:

Affordable Care Act

In addition to the Market Reforms addressing plan design, ACA requirements provide group health plans with administrative guidelines. To ensure administrative compliance with ACA, an HRP allows:

  • Waiting periods for new hires, up to 90 days

  • Mid-year plan modifications with a provided 60 day Notice of Material Modification

  • Internal and external claims appeal processes

  • Dependent eligibility until child reaches age of 26

ERISA

The Employee Retirement Income Security Act (ERISA) establishes fair and equal treatment requirements for employee benefit plans. An HRP supports these, among other ERISA requirements, by preventing discrimination within groups of similarly situated individuals.

HIPAA

Reimbursement plans are generally governed by HIPAA Privacy Rules. When verifying an employee’s proof of payment for qualified medical expenses, the person or entity processing the reimbursement will be exposed to Protected Health Information (PHI) that is required to be held confidential under HIPAA. To comply, HRP software manages all reimbursement requests so the employer is not exposed to PHI.

COBRA

Reimbursement plans with 20 or more participants are generally subject to COBRA. These employers must give terminated employees the option to continue their participation in the reimbursement plan for a period after employment has ended. HRP software provides easy access to all required COBRA notices.

Plan Documents

Lastly, the discussed plan design and administrative considerations must be supported by formal Plan Documents. The respective documents are required by the Internal Revenue Service (IRS), ERISA, and ACA. These are intended to describe the terms and conditions related to the operation and administration of the reimbursement plan. HRP software provides employers with a customized HRP Plan Document, Summary of Benefits and Coverage (SBC) and a Summary Plan Description (SPD). Without these documents, the employer risks operating the dreaded Employer Payment Plan.

Conclusion

As you can see by the lengthy sampling of requirements, using software to DIY a reimbursement program can be a wise decision. Although technically possible to self-administer, the compliance requirements are complex and difficult to navigate, resulting in unnecessary administrative time and burden.

What questions do you have about health reimbursement administration? Leave a comment below.

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