Small and medium sized businesses often use Section 105 Medical Reimbursement Plans as a solution for small business health insurance. A Section 105 Plan allows tax-free reimbursement of medical and insurance expenses, and is often the foundation of a Defined Contribution Health Plan.
When setting up a Section 105 Medical Reimbursement Plan (such as a Health Reimbursement Arrangement or Healthcare Reimbursement Plan), most employers use a third party Section 105 Plan Provider.
That's because Section 105 Medical Reimbursement Plans are a type of group health plan and need to follow certain IRS, HIPAA, ERISA, and ACA rules. A Section 105 Plan Provider helps ensure the plan is set up and administered in a compliant way, and makes administration easy. For additional background, see: Section 105 Plans "for Dummies".
Ten Questions to Ask Section 105 Plan Providers
Here are 10 questions to ask when researching Section 105 Providers.
#1) How long does it take to set up and generate Plan Documents?
It should take less than an hour to design a plan, enroll employees, and generate the legal Section 105 Plan Documents.
Look for a Provider who offers paperless setup and paperless employee enrollment. Also look for a software platform that allows you to administer the plan in 5-10 minutes a month.
#2) What are the different plan options? Can we set up different allowances by type of employee?
Look for a Section 105 Provider who offers plan design flexibility, such as designing different employee classes or setting cost sharing options. The Provider should allow you to give employees allowances monthly or at any time on an exception basis—with automatic monitoring of HIPAA and ERISA discrimination compliance rules.
#3) Where will employees purchase individual health insurance?
Employees can purchase individual health insurance policies from a broker, online website, or their state's Health Insurance Marketplace.
Look for a Section 105 Provider who makes it easy for employees to shop for and purchase individual health insurance policies, ideally directing employees to a designated broker for quotes.
#4) How do employees submit reimbursement requests? How fast are requests processed?
Employees should be able to submit reimbursement requests online, by fax, or by mail, and immediately receive an email acknowledging their claim and providing an online link to monitor claim status. Documentation verifying the premium expense should be permanently available online for convenient access by employees.
Look for a Provider who offers online claim submission, an easy-to-use employee portal, and processes the reimbursement requests within 24 hours. Employees should be able to inquire about their request via online chat, email, fax, mail, or telephone. No request should be rejected for improper or incomplete submission without multiple contacts. All employee contact should leave clear audit trails and meet appropriate regulatory guidelines (e.g. IRS, HIPAA, ERISA, SAS 70, ACA).
#5) How are the reimbursements handled? Is pre-funding required, and how is it integrated with our payroll system?
With many Section 105 Providers, the employer reimburses employees directly. This way, funds stay with the company until the reimbursements are made, and pre-funding of third party accounts is not required.
Look for Provider who does not require pre-funding, and offers easy integration with your existing payroll system.
#6) How are employees notified of the status of their reimbursements? What happens if they submit a request incorrectly?
As soon as an employee submits a reimbursement request, employees should be notified by e-mail that their request has been received and is awaiting processing. Once the claim is processed they should again notified by e-mail. Likewise, if there are any concerns with the request during processing, they should be notified by email describing what further documentation or information is required.
In other words, look for a Provider who offers responsive claims processing, and provides 24/7 tracking of claim status through the online employee portal.
#7) Who can an employee talk to if they have questions about their benefits or reimbursement requests?
Look for a Section 105 Provider who provides responsive support, available through email, telephone, and online chat.
#8) How can I find out about other companies experience with Section 105 Plans? Do you have case studies available?
Ask the Provider for case studies or client success stories. This will help demonstrate how Section 105 Plans work for real companies and nonprofits.
Ask about the Provider's client retention rate. This will provide you a solid idea about client satisfaction and service.
#9) What are the fees associated with a Section 105 Plan? What is the fee structure?
With a Section 105 Plan, the employer sets the amount to contribute to employees' healthcare expenses and therefore controls the budget of the health plan.
Additionally, Providers generally charge a one-time plan setup fee and a monthly per employee per month (PEPM) administration fee.
In addition to setting up your Section 105 Plan and processing the reimbursement requests, look for a Provider that provides a dedicated account representative to support your business and a support team to help employees with their plan. Support teams should be accessible, responsive, educated about defined contribution and health reform, and available by phone and email.