New FAQs Address Reimbursement Plans and Individual Health Policies

Last week, the Department of Treasury, Department of Health and Human Services and Department of Labor released a joint Frequently Asked Question (FAQ) clarifying that under health care reform, employers cannot pay or reimburse employees for individual health policy premiums. 

Earlier guidance explained that employer payment arrangements, including Health Reimbursement Accounts, some Health Flexible Spending Accounts, and employer payment plans, are subject to health care reform requirements.  Such arrangements cannot include annual limits and must cover preventive services.  Guidance also clarified that these types of arrangements would not violate the Affordable Care Act when they were integrated with a health care compliant group health plan (but not an individual plan). 

The new guidance addresses three items: 

1. An employer that offers cash to employees to reimburse the purchase of an individual policy does not comply with health care reform.
2. An employer that offers employees with high risk claims a choice between enrollment in the standard health plan or cash does not comply with health care reform.
3. An employer cannot cancel a group policy and set up a reimbursement plan to help employees select individual insurance policies and allow eligible employees to access the premium tax credit for Marketplace coverage. 

The government considers health care reform to prohibit any arrangement in which an employer provides a cash reimbursement to employees to purchase an individual market policy, whether the arrangement is  pre-tax or after-tax.