Many CPAs and employers consider administering a medical reimbursement plan without proper Healthcare Reimbursement Software. CPAs and employers often overlook important compliance obligations that put them at financial risk. Failure to comply with the following requirements can be costly. Read on for an overview of why you need compliant Healthcare Reimbursement Software.
Note: In this article we are discussing Section 105 Medical Reimbursement Plans, such as Healthcare Reimbursement Plans (HRPs) and Health Reimbursement Arrangements (HRAs), that offer tax-free reimbursement for eligible medical expenses and/or individual health insurance premium expenses.
Affordable Care Act (ACA) Requirements
The following ACA (federal health reform) provisions apply to Section 105 Medical Reimbursement Plans in certain cases:
Dependent Coverage for Adult Children up to Age 26
Coverage of Preventive Care Without Cost-Sharing
Annual and Lifetime Limit Rules
Form 720: Fees to Fund Research on Patient-Centered Outcomes
Summary of Benefits and Coverage (SBC)
60-day Notice of Material Modifications
Internal and External Claims and Appeals Processes for Health Claims
Read more about the importance of compliance with ACA rules.
Section 105 Medical Reimbursement Plans are self-funded health plans, and governed by the HIPAA Privacy Rules. In order to administer an reimbursement plan, the entity processing the claims receives protected health information (PHI) which is protected by HIPAA. Employers that do not comply can be subject to civil penalties of up to $100 per violation.
Section 105 Medical Reimbursement Plans are group health plans subject to COBRA. Under COBRA, employees that experience a qualifying event are entitled to continuation coverage under the employer’s plan. An employer that fails to extend COBRA coverage to participants can be subject to substantial fines. Employers can be fined up to $110 per day for failure to provide an initial notice or election notice. Learn more about COBRA and Section 105 Plans.
Section 105 Medical Reimbursement Plans are group health plans subject to Medicare Secondary Payer (MSP) provisions. Employers are required to provide coverage information to the Centers for Medicare and Medicaid Services (CMS). The information reported to CMS will allow better coordination of payer responsibilities between the group health plan and Medicare. Failure to comply could result in fines of up to $1,000 per day.
Section 105 Medical Reimbursement Plans are defined as employee welfare plan under ERISA. ERISA requires that every [welfare] plan be established and maintained pursuant to a written instrument. The written instrument or plan document serves to define what expenses are eligible for reimbursement, the amount of employer contribution, and whether the funds may be rolled over from year to year. Not only could an enforcement action be brought against an employer for failure to have a plan document, but it is difficult for the employer to prove plan terms and enforce its provisions. Learn more about Section 105 plan documents.
ERISA-Compliant Reimbursement of Individual Health Plans
The U.S. federal government has specific regulations that employers must comply with in order to reimburse employees for individual health insurance premiums without triggering ERISA plan status for the individual health insurance policies. Learn more about ERISA compliant individual policy reimbursement.
Editor's Note: This post has been updated with the most current health insurance information. The article was originally published in June 2014.
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