Health Reimbursement Plans are gaining popularity with small and medium-sized businesses as a way to reimburse employees for individual health insurance. As such, Health Reimbursement Software is gaining popularity as a tool for compliance and easy administration.
For background on Health Reimbursement Plans, see: Advantages of Reimbursing Employees for Individual Health Insurance.
Why Use Health Reimbursement Software?
There are two main reasons why businesses use Health Reimbursement Software to reimburse employees for individual health insurance: 1) Time savings/ease of use, 2) Tax-savings/compliance.
1. Time Savings & Ease of Use
Good Health Reimbursement Software removes the time, cost, and complication of offering health benefits.
Employers that use a software platform can expect to:
Administer a reimbursement program online in less than 5 minutes per month.
Integrate reimbursements with existing payroll or HR processes.
Manage the reimbursement program online 24/7.
2. Tax Savings & Compliance
Health Reimbursement Software keeps the business in compliance with three key areas:
a) Tax Savings & IRS Compliance: If the company has chosen a tax-free reimbursement program, such as a Section 105 Healthcare Reimbursement Plan (HRP), the IRS requires that a formal health plan be established, with IRS-compliant plan documents.
b) Federal Compliance: The federal government has guidelines for employers who want to contribute to employee's individual health insurance premiums. A software platform ensures compliance with HIPAA, ERISA, and ACA rules.
- ERISA: Under ERISA, the employer is not allowed to “endorse” a specific individual health insurance plan. Health Reimbursement Software keeps the employer ERISA-compliant because they never know what type policies are purchased.
HIPAA Privacy Rule: By using a compliant software platform, a third party reviews and processes employees’ reimbursement requests, keeping all medical information HIPAA-protected. And with software, all receipts are stored in compliance with HIPAA for 10 years, as required by the IRS for audit purposes. The employer never sees employees’ medical information.
c) ACA/Health Care Reform: The Affordable Care Act (ACA) introduced new requirements for Health Reimbursement Plans including how benefit information is presented to employees (Summary of Benefits & Coverage, or SBC), new reporting forms (720/5500), and new plan design requirements (ex: prohibition on annual limits). This includes compliance with the new “Market Reforms” required by the ACA.
A good software platform provides the employer with all of the appropriate documents, data, and plan settings to be ACA compliant.
FAQ: Can I Administer a Health Reimbursement Plan Myself?
Technically, an employer can self-administer its own Health Reimbursement Plan, but failure to comply with the minimum federal administration requirements is common (and costly) without utilizing a compliant Healthcare Reimbursement Software.
If an employer does not utilize a software platform to fully comply with the IRS, ERISA, HIPAA, COBRA and ACA regulations, the administrative cost likely outweighs the benefits.
FAQ: Can I Pay For Employees’ Insurance Premiums Without a Formal Health Reimbursement Plan?
Some businesses might want to pay directly for an employee's individual health insurance plan without utilizing anERISA andHIPAA-compliant platform, but doing so may put the business out of compliance with federal regulations and may increase the company’s (and employee's) tax liability. Read more: Why Businesses Should Never Pay Individual Health Insurance Premiums.