Last week, the Columbia Tribune reported University of Missouri (MU) graduate students were losing their employer contribution to help with premium costs. The reason? MU’s practice of contributing to the university’s Aetna student health insurance plan (an “individual market plan”) was a non-compliant Employer Payment Plan.
Staring down the barrel of a $36,000 annual fee per graduate student, MU canceled their health insurance contribution and opted to provide graduate students a one-time fellowship grant.
MU’s story reflects how employers all over the nation are having to make tough decisions on how to deal with the Affordable Care Act’s new rules and reforms.
In many ways, the restriction on Employer Payment Plans strips employers of affordable ways to help employees with healthcare costs. For example, providing a contribution to individual health plans was likely significantly more affordable for MU, and for employees, than offering traditional group-based coverage.
But what is not always mentioned in these stories is that there is an alternative to an Employer Payment Plan that allows employers to help with health insurance costs and avoid the costly fees.
Here’s what MU, and any employer, can do to provide employees a contribution toward their individual health plans.
Alternative to Employer Payment Plans
As an alternative to the Employer Payment Plan, MU could set up a self-insured medical reimbursement plan (sometimes called a Health Reimbursement Plan or Section 105 Plan) to give graduate students an allowance for health insurance.
Unlike an Employer Payment Plan, a self-insured medical reimbursement plan can be designed to follow the new health reform rules. How? The plan is structured to only reimburse employees for individual health insurance premiums, and it covers basic preventive care as required by the reforms.
Here’s how a self-insured medical reimbursement plan works:
The employer establishes a reimbursement plan. In doing so, the employer sets monthly contribution amounts and eligibility criteria.
Employees can keep their current coverage, or select any individual health plan.
Employees submit a reimbursement request to their health plan administrator (ex: healthcare reimbursement software).
The employer reimburses employees for their approved expenses, up to their healthcare balance amount.
Of course, a second alternative to an Employer Plan Payment is to do what MU did - offer employees a stipend (bonus or raise) to use on health insurance, but this must be treated as taxable income.
As I read that MU was canceling its contribution to graduate student’s individual health plans, two things came to mind: 1) Employer contributions to individual health plans are much more common than most people think. It is a healthcare strategy adopted by small and large employers, alike. 2) While the reporting focuses on the hardship to employees and severity of fees (rightfully so), another big take way is there are alternatives to Employer Payment Plans that allow employers to help with individual health plans and avoid penalties.
What are your takeaways? What questions do you have about Employer Payment Plans or how to help employees with individual health plan coverage? Leave a comment below.