Under the Affordable Care Act (“Obamacare”), health insurance tax subsidies are available to the majority of individuals and families who do not receive insurance through an employer. If an employer offers a minimum level of coverage, employees are disqualified from the subsidies.
So, what about employees who are offered a Section 105 Health Reimbursement Plan (HRP)? Are participants in an HRP also disqualified from the subsidies? This article provides an overview of how the federal health insurance subsidies work in tandem with an HRP.
How an Employer’s Health Plan Impacts Eligibility for Subsidies
If an employee has an offer of health coverage from an employer whose plan meets certain standards (i.e. it is an “eligible employer-sponsored plan”), the employee is not eligible to receive a federal subsidy - even if the employee does not enroll in coverage.
However, if the employer’s health plan offered does not meet these standards, the employee is not disqualified from accessing the subsidies.
Let’s examine this closer.
Internal Revenue Code § 36B provides that individuals are allowed access to the health insurance subsidies as long as they are not eligible for other minimum essential coverage. This includes coverage under an eligible employer-sponsored plan that is also affordable to the employee and provides minimum value.
Under these guidelines, an individual is not considered to be offered minimum essential coverage if any one of the following circumstances apply:
The employer-sponsored plan does not qualify as an “eligible employer-sponsored plan,” or
The coverage provided is not affordable, or
The coverage does not provide minimum value.
When discussing an HRP, individuals are allowed access to premium tax credits because an HRP is not an “eligible employer-sponsored plan.”
What is an Eligible Employer-Sponsored Plan?
An eligible employer-sponsored plan, as defined by IRC § 5000A, is a governmental plan, or any other plan or coverage offered in the small or large group market (“group health insurance”).
IRC § 5000A(f)(2)
Eligible employer-sponsored plan
The term “eligible employer-sponsored plan” means, with respect to any employee, a group health plan or group health insurance coverage offered by an employer to the employee which is—
(A) a governmental plan (within the meaning of section 2791(d)(8) of the Public Health Service Act), or
(B) any other plan or coverage offered in the small or large group market within a State.
Such term shall include a grandfathered health plan described in paragraph (1)(D) offered in a group market.
A Section 105 Health Reimbursement Plan (HRP), such as ZaneHealth, is not a governmental plan and does not provide coverage offered in the small or large group market within a state. As a result, an HRP is not an eligible employer-sponsored plan and does not qualify as minimum essential coverage.
For this reason, HRP participants - if otherwise eligible - are allowed access to the federal health insurance subsidies.