| Blog

6 Premium Reimbursement Facts All Small Businesses Need to Know

Written by: Christina Merhar
June 26, 2014 at 7:00 AM

Over the last few years, small businesses have gradually started transitioning employees to individual health insurance. And with health reform in full effect, this trend is accelerating. As small businesses transition employees to individual health insurance, how can employers continue to contribute to employees' health benefits?

Facts about Premium Reimbursement

Small businesses can set up a premium reimbursement program (also called a "Pure" Defined Contribution Health Plan) to reimburse employees for individual health plans.

This article provides six facts on premium reimbursement all small businesses need to know. 

1. It's a Formal Benefits Package

With premium reimbursement, small businesses set up a formal plan to reimburse employees for their substantiated individual health insurance premiums. The reimbursements can be taxable, or tax-free, depending on the type of plan set up. Either way, employees see the reimbursements as a valued health benefits offering.

2. Small Businesses Can Reimburse Individual Health Insurance Premiums

A premium reimbursement program allows a small business to reimburse employees for their individual health insurance premiums. The business only reimburses employees for eligible premium expenses, up to the amount of their healthcare allowance.

3. Small Businesses Set and Control the Cost

Premium reimbursement is an affordable alternative to traditional group health insurance. With premium reimbursement, employers define and control the cost. There are no minimum contribution requirements, and no annual renewal fees.

4. Employees Can Access Premium Tax Credits

A big benefit of premium reimbursement is that it does not disqualify employees from the premium tax credits. Depending on household income, employees may qualify for federal premium tax credits if they purchase a plan offered through their state's Health Insurance Marketplace.

5. Premium Reimbursement Helps Recruit & Retain Employees

Premium reimbursement is a cost-effective solution to offering health benefits, and it provides employees access to quality health insurance coverage. See: 5 Reasons Employees Love Premium Reimbursement.

6. Reimbursement Software Keeps the Business Compliant

Small businesses use health reimbursement software to ensure compliance with the ACA and various federal regulations governing this type of health plan. Software also makes administration quick and easy.

Questions? Leave a comment below.

Topics: Defined Contribution Health Plans