Feds draw bright line between employer group, individual coverage

The U.S. Departments of Labor, Health and Human Services and Treasury issued guidance that draws a bright line delineating employer group health coverage from individual coverage sold to those who aren’t covered by government or employer sponsored health plans.

Under the guidance issued November 6, employers cannot reimburse employees to cover individual policy premiums. “If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer’s payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee,” the guidance states.

Nor may employers set up health reimbursement account (HRAs) that enable employees to purchase coverage and access advance premium tax credits for individual plans sold in the state health benefit exchange marketplace. HRAs are group health plans and therefore employees participating in them are ineligible for the credits or cost-sharing reductions, the departments reason. “The mere fact that the employer does not get involved with an employee’s individual selection or purchase of an individual health insurance policy does not prevent the arrangement from being a group health plan,” the guidance notes.

In addition, the guidance states employers may not offer cash to an employee in poor health in order to steer the employee away from a large employer’s group health plan. Such arrangements violate Health Insurance Portability and Accountability Act (HIPAA) provisions barring discrimination based on one or more health factors, the departments conclude. “Offering, only to employees with a high claims risk, a choice between enrollment in the standard group health plan or cash, constitutes such discrimination.”

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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Frederick Pilot

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