The Affordable Care Act prohibits an employer from paying or reimbursing employee premiums for individual health insurance. These types of arrangements violate both the annual dollar limits and the preventive services mandates under health care reform, since they are considered separate group health plans that must meet health care reform requirements.
An employer payment plan does not apply to an arrangement in which an employee can either have after-tax amounts applied to health coverage or receive the amounts as cash. It also does not apply if an employer increases an employee’s compensation but does not condition the increase on the purchase of health coverage.
All employers that reimburse employees for the purchase of individual health insurance should review their practices to make sure they comply with health care reform requirements.