Cash for Premium Payments - What You Can (and Cannot) Do
September 11, 2015 at 12:00 PM •
Written by: Christina Merhar
As employers see the advantages of modern individual health insurance, a common health benefit strategy is to reimburse employees for their premiums. As employers explore options, a common question is, “Can we provide employees cash for premium payments?”The answer is no. Employers should not directly pay or directly reimburse employees for premium payments. This type of Employer Payment Plan can lead to new penalties. There are, however, compliant options for helping employees with their premium payments.
It sounds complicated, but it doesn’t have to be. In this article, we’ll provide a simple breakdown on what you can and cannot do when giving employees cash for premium payments.
Cash for Premium Payments - What Not to Do
Under new health reforms, there are new rules - and new penalties - for helping employees with their personal health insurance premiums in the wrong way.
Here is what employers should avoid when providing cash for premium payments:
Paying directly for employees’ premium payments (ex: making payments to the insurance company for an employee's personal policy).
Reimbursing an employee directly for premium payments without a formal, compliant reimbursement health plan (ex: giving employees cash after they show proof of their insurance policy).
Provide employees a fixed, taxable stipend to purchase health insurance (ex: give employees a fixed monthly amount for health insurance, but do not ask employees to submit proof of their premium payment).
Either of these options - a formal, compliant reimbursement plan or a health insurance stipend - allows you to provide a contribution to employees’ premium payments.
As employers explore ways to provide employees cash for premium payments, there are two compliant ways to achieve this goal: a health reimbursement plan, such as ZaneHealth, or a taxable health insurance stipend. Employers who provide direct payment or direct reimbursement for premium payments may be subject to a $100 per employee, per day penalty.