A self-insured medical reimbursement plan is a term used to describe Healthcare Reimbursement Plans, Health Reimbursement Arrangements (HRAs), and other types of formal medical reimbursement plans.
What is a Self-Insured Medical Reimbursement Plan?
A self-insured medical reimbursement plan, like an HRA, is a written plan for the benefit of employees which provides for tax-free reimbursement of employee medical expenses, as allowed in Section 105 of the IRS code.
With a self-insured medical reimbursement plan, an employer can reimburse an employee for medical and insurance expenses. These can be expenses incurred by the employee or his or her dependents, but they must be allowed under the plan document, which is created by the employer outlining the expenses eligible for reimbursement and other benefit information.
For example, many employers (usually smaller and mid-sized) set up a self-insured medical reimbursement plan to reimburse employees for individual health insurance premiums - instead of offering group health insurance coverage. The reimbursement plan is not health insurance, rather it is a vehicle to provide tax-free reimbursement for individual health insurance premiums. A self-insured medical reimbursement plan is often used as the foundation of a "pure" defined contribution health plan.
Types of Self-Insured Medical Reimbursement Plans
A self-insured medical reimbursement plan is often used synonymously with:
- Health reimbursement arrangements (HRAs)
Section 105 Medical Reimbursement Plans
How to Set up a Self-Insured Medical Reimbursement Plan
The employer establishes a formal written reimbursement plan, such as HRA plan documents.
The employer determines the amounts available to each employee for reimbursements during a period of coverage.
As eligible expenses are submitted, the employer reimburses the employees (100% tax-free) up to the available amounts.
Administering a Self-Insured Medical Reimbursement Plan
Can a business self-administer a self-insured medical reimbursement plan? The short answer is yes, but it is virtually impossible for a business to stay in compliance without compliant healthcare reimbursement software.
A primary reason for using administration software is that many employers will otherwise overlook important compliance obligations that put them at risk financially. Failure to comply with the following requirements can cost an employer thousands of dollars per day in fines:
Legal Plan Documents
COBRA (if applicable)
New Affordable Care Act (ACA) requirements, including the new "Market Reforms"
There are many additional benefits of using an administrator versus self-administration, such as online reimbursement request submission and processing, integrated plan documents, and different allowances by class of employee.
What questions do you have?