With any new employee health benefit program, employee education is one of the most important factors for success. This is especially true with a premium reimbursement program, as it may be a new way for employees to receive healthcare benefits.
To help your company implement a premium reimbursement plan, we’ve answered the top ten employee questions.
1. What is Premium Reimbursement?
Premium reimbursement is a health plan that gives you (the employee) control over your health insurance. Instead of offering a one-size-fits-all health plan, the company is providing you a monthly healthcare allowance you can spend on health insurance.
With premium reimbursement, you get to purchase a health plan of your preference and are reimbursed for your premium cost up to your healthcare allowance.
2. How Does Premium Reimbursement Work?
With this type of benefit program:
The company provides eligible employees monthly healthcare allowances.
Employees purchase their own health plan.
Employees submit a reimbursement request, usually through a third-party who processes the request.
The company reimburses employees for approved expenses via payroll, check, or direct deposit.
3. What are the Benefits for Me and My Family?
Premium reimbursement helps you and your family because you, the employee, get:
Choice: You choose how to spend your healthcare allowance. For example, you choose the health plan that best fits your family’s needs. This includes the insurance company, the coverage, and the doctors.
Flexibility: You can keep the plan as long as you want. Or, plans can be modified to meet changing family medical needs. You are not tied in to one specific plan that the company chooses.
Lower health insurance costs: On average, individual health plans cost less than traditional employer plans for the same coverage. And, there are new premium tax credits available to many families through the Health Insurance Marketplaces. By not offering a traditional employer plan, the company is giving you and your family access to the premium tax credits.
4. How Does Individual Health Insurance Work?
Individual health insurance is a type of policy an individual purchases for himself and/or his family - just like car insurance. You own the policy and can take it with you if you leave the company. You will pay for the policy with your money, and can use the benefit to be reimbursed for your premium (or a portion of the premium).
5. Where do I Purchase Health Insurance?
Buying an individual health insurance policy has never been easier. You can purchase health insurance through a licensed health insurance agent (who is appointed to represent the insurance carriers), online, or through the Health Insurance Marketplace in your state. You are no longer asked medical history information on the application, and you cannot be denied or charged more because of a pre-existing health condition.
6. What Kinds of Premiums can Be Reimbursed?
With your premium reimbursement plan, you can be reimbursed for the following types of insurance premiums provided they were not already paid with pre-tax dollars:
Major medical individual health insurance premiums
Limited benefit individual health insurance premiums
Dental care and vision care premiums
Qualified ancillary premiums (e.g. accident policies)
Medicare Part A or B, Medicare HMO, and employer-sponsored health insurance premiums
Medicare Advantage and Supplement premiums
Long-term care premiums
Health insurance policy premiums that are not reimbursable tax-free through a premium reimbursement plan include:
Life insurance policies
Policies providing payment for loss of earnings ("income replacement"), such as most critical illness and disability policies
Policies for loss of life, limb, sight, etc.
Policies that pay a guaranteed amount each week for a stated number of weeks if you are hospitalized for sickness or injury
Health care ministry sharing programs ("medi-share" or medical share plans)
7. How do I Request Reimbursement?
Most employers use a premium reimbursement software to help you manage your benefit. Log in to your online participant account to request reimbursement, or submit a paper form via fax or mail. To request reimbursement, you will need documentation showing your coverage and your expense.
8. Can I still Access the Premium Tax Credits?
Your enrollment in a premium reimbursement plan does not disqualify you from federal premium tax credits. That’s because a premium reimbursement plan is not health insurance coverage. You are eligible for a premium tax credit if you meet certain income requirements and do not have access to affordable health insurance through an employer or government program such as Medicaid or Medicare.
9. Does the Benefit Satisfy the Requirement to have Health Insurance?
No. A premium reimbursement plan is not an “eligible employer-sponsored plan” (i.e. minimum essential coverage) and does not satisfy the Individual Mandate. To avoid the Individual Shared Responsibility Payment, you will need to be covered under a qualified health insurance policy or qualify for an exemption. You can use the premium reimbursement plan to be reimbursed for your premium, or a portion of your premium.
10. Are Reimbursements Tax-Free?
Yes. Reimbursements are not included in your income and thus not subject to any income or payroll tax withholding.
Premium reimbursement can be a cost-effective health benefit solution, especially for small and mid-size employers. As with any benefit program, educating employees is a key component for success. Understand these ten common questions and use them to answer employees’ questions and concerns.
What premium reimbursement questions would you add to the FAQ? What additional questions do you have? Leave a comment below.