"Employers with 50-99 employees who have never offered health insurance before can begin with a blend of a MEC (minimum essential coverage plan) and gap benefits."
We just spoke with one of our clients who has been purchasing voluntary benefits through us for years. They have never offered an employer-sponsored health plan to their employees before. Instead, they've been offering their employees $250/mo to help offset the cost of their individual health insurance.
While admirable in a different time and place, this practice could now get them fined big time.
These types of reimbursement arrangements are considered to be "employer payment plans."
While that means they do constitute a group health plan under the Affordable Care Act -- unfortunately it's defined as one of those "plans" that does not meet the requirements of the Act.
It's true that for a time certain small employers were temporarily allowed to earmark extra money they paid to employees as being for their individual policy premiums, but new ACA guidance issued earlier this year closed that window as of July 2015.
Since then, employers who reimburse employees for the cost of their individual health insurance are subject to substantial fines.
You can pay employees additional compensation -- you just can't pay it on condition employees use it towards the purchase of individual health care coverage.
So what's an employer with 50 to 99 employees to do?
In the case of our client, concerns about Seattle's $15 minimum wage law floating down the coast have them wondering if they'll even be able to stay in business, let alone start offering their employees an employer-sponsored health care plan that will meet ACA's minimum requirements by the January 2016 deadline.
For employers like our client who are faced with trying to figure out the Wild, Wild West of Health Care Reform and meet the looming 2016 deadline, a penalty prevention strategy may be the appropriate first step.
"In an ideal world, health care would not cost so much and we would all be able to save enough to pay for our out-of-pocket expenses."
A blend of what's referred to as a MEC (Minimum Essential Coverage) plan and gap benefits is about as conservative as you can get while still meeting the ACA requirements, as well as keeping your employees out of the exchanges (which would expose you to additional significant fines).
MECs are relatively inexpensive, and gap benefits can either be a voluntary employee purchase, a shared expense, or picked up by the employer. While this approach covers your tail it also gives you more flexibility than most traditional health plans out there.
Look at it this way. Perhaps you can be grateful you're not trying to untangle from an expensive, first-dollar coverage plan that your employees love because it pays "everything" like the larger companies are right now. They're facing a 40% Cadillac Tax if they don't figure out how to skinny down their plan before that ACA deadline.
Would we ever recommend just a MEC without gap benefits? Nope. High-deductible plans were heralded as the savior for employers even before the ACA came along. Now, with employer-sponsored and ACA exchange high-deductible plans, the news has been full of stories about Americans struggling with the resulting out-of-pocket expenses.
In an ideal world, health care would not cost so much and we would all be able to save enough to pay for our out-of-pocket expenses. High-deductible plans, with their accompanying HSAs and FSAs, as well as the ACA were structured as if we were already living in this ideal world. Alas, we're still quite a ways away, so pairing gap benefits, or supplemental insurance, with these plans is a necessity.
You can do this! Let us know how we can help.
September 27 2015
Article by Daniel J. McCoy, Saundra L.M. Riley and Mona A. Clee - Law Firm of Fenwick & West LLP
"Caution—Reimbursement Of Employee Individual Health Premiums May Expose Employer To Substantial Fines"
Rylan Klaseen & Associates
Rylan Klaseen & Associates
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