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We've updated one of our most popular materials. See what's new in our guide to MERPs.

A Guide to Medical Reimbursement Plans

Frequently Asked Questions about Medical Reimbursement Plans

How Do We Administer a Medical Reimbursement Plan?Medical_reimbursement_plans_questions

Most companies partner with a Medical Reimbursement Software company or third party administrator to set up and administer the health plan.

Who May Contribute to Medical Reimbursement Plans?

Who may contribute to a Medical Reimbursement Plan depends on the type of plan offered. With an HSA, anyone may contribute. With an HRA or HRP, only the employer may contribute. With an FSA, the employee or employer may contribute.

Are Medical Reimbursement Plans Tax-Free?

Yes, if an employer sets up a formal Medical Reimbursement Plan (such as an HSA, HRA, HRP, or FSA), the contributions are generally tax-deductible to the business, and reimbursements are generally tax-free to employees. Note: Tax benefits may be limited for some business owners.

How Does Health Reform Impact Medical Reimbursement Plans?

The Affordable Care Act (known as ACA, ObamaCare, or health reform) was signed into law in 2010 and impacts many areas of health care and health, including Medical Reimbursement Plans such as HRAs, HRPs, HSAs, and FSAs. To summarize:

  • As of 2011, over-the-counter (OTC) medications are no longer eligible for reimbursement from a Flexible Spending Account (FSA), Health Savings Account (HSA), or Health Reimbursement Arrangement (HRA), unless obtained with a prescription (except for insulin).

  • As of 2011, the excise tax for non-qualified HSA withdrawals doubled from 10% to 20%.

  • As of 2013, Health FSA employee salary reduction contributions limited to $2,500 per plan year, with future increases to allow for inflation.

  • As of 2014, Stand-alone HRAs with two or more participants are generally not compliant.

  • As of 2014, employers using an HRP to reimburse employees for individual health insurance must ensure the plan complies with the new ACA “Market Reforms.”

Do you have additional questions about Medical Reimbursement Plans? Contact us. We'd be happy to help.

Learn the differences between HSAs, HRAs, and FSAs