The IRS released guidance under Notice 2013-54 advising that employers who reimburse or pay any portion of Individual policy premiums are engaged in “employer payment plans”. These plans, according to the IRS, are also considered group health plans and subject to the market reforms mandated by the Affordable Care Act (ACA). These market reforms include the prohibition on annual limits for Essential Health Benefits (EHB). (By contributing toward the defined premiums associated with Individual policies secured by employees, the employer is essentially creating an annual limit.) According to Notice 2013-54, these employer payment plans cannot be integrated with Individual policies in order to satisfy these market reforms and subject the employer to a $100/day excise tax penalty per employee. This could equate to up to $36,500 per employee per year!
For the full text of Notice 2013-54, click here.
At Health Insurance Shop, Inc., we help employers analyze the best course of action to take regarding health insurance coverage for their employees. In some cases, this could include dropping the Group health plan and assisting employees in securing Individual policies. Although most employers would feel compelled to increase wages to off-set the contribution employees will be losing – we do not recommend it. Call us today and we’ll explain why, and offer alternative options that you should consider.