Small and medium sized businesses are rapidly adopting individual health insurance and premium reimbursement programs to offer better, more affordable employee health benefits. A common question is how the Affordable Care Act (ACA) impacts these types of healthcare reimbursement plans. This article examines ACA rules for premium reimbursement plans.
What is a Premium Reimbursement Plan?
With a tax-preferred premium reimbursement plan, the employer sets up a limited self-insured medical reimbursement plan, commonly referred to as a Healthcare Reimbursement Plan (HRP), a Section 105 Medical Reimbursement Plan, or a "Pure" Defined Contribution Health Plan.
To comply with ACA rules, the plan is structured to reimburse employees for eligible health insurance premiums up to a specified monthly healthcare allowance, and basic preventive health services without cost-sharing.
Key ACA Rules for Premium Reimbursement Plans
There are nine key ACA rules that apply to premium reimbursement plans.
1. Annual Limit Compliance ("PHS Act 2711")
Section 2711 of the Public Health Services (“PHS”) Act, as added by the ACA, provides that no annual or lifetime limits may be placed on essential health benefits (“EHB”). PHS Act 2711 provides that annual limits and lifetime limits may be placed on benefits that are not EHB, such as health insurance premiums.
As such, compliant self-insured medical reimbursement plans are designed to only reimburse individual health insurance premiums up to a specified monthly healthcare allowance, and basic preventive health services as required by PHS Act Section 2713 (discussed next).
2. Preventive Care Compliance ("PHS Act 2713")
Section 2713 of the PHS Act, as added by the ACA, requires group health plans (including self-insured medical reimbursement plans) to cover basic preventive health services without cost-sharing.
3. 90-Day Waiting Period Compliance
The ACA prohibits waiting periods over 90 days for eligible employees.
4. Internal and External Claims Appeal Process
The ACA added new requirements to the internal and external appeal process including how and when procedures are communicated to plan participants.
5. Dependent Coverage for Adult Children up to Age 26
Section 2714 of the PHS Act, as added by the ACA, provides that a group health plan (including a self-insured medical reimbursement plan) that makes available dependent coverage of children must make such coverage available for children until 26 years of age.
6. Uniform Explanation of Coverage and Definitions
The ACA requires that group health plans, participants, and beneficiaries receive a standardized summary of benefits and coverage (“SBC”) and a set of uniform definitions (“Uniform Glossary”), both of which must conform to requirements outlined in the ACA and existing regulations.
7. Form 720 Comparative Effectiveness Research (CER) Fee
The ACA includes a "research fee" that plan sponsors must pay on an annual basis annually via Form 720.
8. Form 5500 Series Form (Annual Report)
Employers with 100+ employees must file a Form 5500 (annual report).
9. 60-Day Notice of Material Modification
The ACA requires employers to provide 60 days advanced notice to participants when making material modifications to their group health plan (including self-insured medical reimbursement plans).
Tip: To make compliance easy with these ACA requirements, most employers use a premium reimbursement provider.
Other Rules Premium Reimbursement Plans Must Follow
In addition to ACA rules, tax-preferred premium reimbursement plans must follow these rules and regulations:
IRS (see: IRS Rules for Premium Reimbursement Plans)
ERISA (see: ERISA Rules for Premium Reimbursement Plans)
HIPAA Medical Privacy
In future articles, we will discuss each of these topics in detail. For a complete list of rules and regulations, download the new eBook "Compliance 101".