The Department of Labor (DOL) confirmed that if an employer offers employees cash to reimburse the purchase of individual health insurance, such an arrangement will violate applicable rules under the the Affordable Care Act (ACA).    Click here to view the FAQs in their entirety.

 

The DOL guidance also addresses:

  • Employers offering employees with high claims risk a choice between enrollment in its standard group health plan or cash. These arrangements will violate the nondiscrimination provisions of the Health Insurance Portability and Accountability Act (HIPAA), regardless of whether:
    1. The cash payment is treated by the employer as pre-tax or post-tax to the employee;
    2. The employer is involved in the selection or purchase of any individual market product; or
    3. The employee obtains any individual health insurance.
  • The marketing of products claiming that employers can cancel their group policies, set up an Internal Revenue Code Section 105 Reimbursement Plan that works with brokers or agents to help employees select individual insurance policies, and allow eligible employees to access premium tax credits for Health Insurance Marketplace coverage. These arrangements are problematic for two reasons:
    1. The arrangements described are themselves group health plans and, therefore, employees participating in such arrangements are ineligible for premium tax credits for Marketplace coverage.
    2. Such arrangements will violate the ACA’s market reforms, including the annual dollar limit prohibition and preventive services requirements.