This section outlines how to implement a Health Reimbursement Plan.
There are six steps to consider as you set up and implement a Health Reimbursement Plan (HRP):
Businesses have three main options for compliant HRP administration: a traditional third party administrator ("TPA"), an Administration Software provider, or self-administration. Because of compliance reasons, and for ease of use and time savings, most businesses use a third party to administer the plan.
Administration Software for a Health Reimbursement Plan
HRP Administration Software provides flexibility in plan design, ensures compliance, and makes administration easy for both the employer and employees.
This section outlines 13 features to look for with HRP Administration Software.
(1) Employee Healthcare Allowances
Employers should be able to give employees allowances with automatic monitoring of HIPAA and ERISA discrimination compliance rules. Deferred allowances should be possible for new hires, and suspended HRPs should be allowed for former employees that employers hope to re-hire on a seasonal basis.
(2) Reimbursement Requests
Employees should be able to submit reimbursement requests online, via fax, or mail, and immediately receive an email acknowledging their claim and providing an online link to monitor claim status. Premium documentation should be permanently available online for the convenience of employees desiring such access to copies of invoices, etc.
(3) Reimbursement Request Processing
Reimbursement requests should be processed within 24 hours and employees should be able to inquire about their claim via online chat, email, fax, mail or telephone. No request should be rejected for improper submission without multiple contacts from their Plan Supervisor. All employee contact should leave clear audit trails and meet appropriate regulatory guidelines (e.g. IRS, HIPAA, ERISA, SAS 70).
(4) Reimbursement Tracking
Employees should receive email notification when their reimbursement request is approved and again confirming when (and how) it is reimbursed. Reimbursement should be administered individually or on a batch periodic basis via check, payroll addition, or direct deposit leaving a clear and permanently-available audit trail.
(5) Employee Ledger
All employees should have access to an online ledger showing their current HRP balance, allowances, claims, and reimbursements including permanent storage of receipts, relevant tax information, and the ability to save or export their own medical information via the administration platform.
(6) Integrated Electronic HRP Plan Documents, SPD, and Employee Signature
The HRP Plan Document and HRP SPD (Summary Plan Description) should be electronically created, readily accessible online, and signatures should be collected electronically. Employers should be able to administer a change to benefits for any specific Class of Employees at any time and the electronic documents should automatically change and, where required, new electronic signatures should be collected when the employee is next online.
(7) Classes of Employees
Employers should be able to instantly create online unlimited different Classes of Employees with each Class receiving different benefits by employee family status.
(8) Employee Enrollment
Employers should be able to instantly enroll or remove employees in real-time on an individual or batch basis, with automatic printing of employee Welcome Kits and other appropriate plan administration information.
(9) Plan Setup
Employers should be able to completely set up and/or change both their HRP plan and their Plan Documents simultaneously online.
Employers should be able to view all reimbursements by employee or by Class of Employees, and monitor in real-time de-identified Claim information for each Class of Employees by Category of Expense. Employees should be able to see 3-5 prior years of HRP expenses broken down by categories of expense.
(11) HRP Tax Forms and Information
All information for required administration reporting (e.g. 5500 for employers with more than 100 employees) should be available online in real time, and non-eligible HRP participants (e.g. independent contractors, owners of Sub S companies) should receive appropriate 1099 information.
(12) Personal Health Insurance Distribution
The Software should have helpful resources for employees on personal health insurance. Additionally, look for Software that automatically provide their health insurer(s) a CRM (Customer Relationship Manager) to best serve their employees—including automatic notification to insurer(s) when an employee’s plan status changes due to family additions, promotions, etc.
(13) HIPAA and ERISA Compliance
The Employer should be automatically protected and the HRP administration made HIPAA Compliant through technology rather than the training of administering employees. For example, employers should not be able to view HIPAA-protected employee information, and should automatically follow Department of Labor HIPAA and ERISA guidelines for employers allowing insurers access to their employees.
Frequently Asked Questions about Health Reimbursement Plans
This section answers frequently asked questions (FAQs) about Health Reimbursement Plans.
What is a Health Reimbursement Plan?
A Health Reimbursement Plan allows companies to reimburse employees tax-free for individual health insurance premiums.
How does a Health Reimbursement Plan work?
With a Health Reimbursement Plan:
- The company sets monthly healthcare allowances.
- Employees purchase their own health plan.
- Employees submit a reimbursement request.
- One the request is approved, the company reimburses employees for the approved expense via payroll, check, or direct deposit.
How is a Health Reimbursement Plan Structured?
A Health Reimbursement Plan is a Section 105 Self-insured Medical Reimbursement Plan. It is structured to reimburse employees for health insurance premiums up to a specified monthly healthcare allowance, and basic preventive health services as required by Public Health Services (“PHS”) Act Section 2713.
How much time does it take the company to administer a Health Reimbursement Plan?
With the right Administration Software, an HRP takes less than 5 minutes per month to administer online. Companies use the software to add approved reimbursements to payroll. There are no time-consuming annual renewals, and employees maintain a direct relationship with the insurance company of their choice.
How does a Health Reimbursement Plan work for employees?
Employees select and purchase an individual health policy that best fits their families' needs, choosing any plan, from any carrier.
Employees submit a reimbursement request for their premium expense, and are reimbursed up to the amount available in their balance. Employees can keep their same network and doctors, and pick a coverage level that fits their health needs. Individual health plans cost 20% - 60% less than traditional group plans, and tax credits may be available to qualifying employees.
Is a Health Reimbursement Plan health insurance?
No. A Health Reimbursement Plan is not health insurance. A HRP is a Self-insured Medical Reimbursement Plan, allowed by Section 105 of the IRS code.
What type of healthcare expenses are reimbursable through ZaneHealth?
Healthcare expenses that may be reimbursed through a Health Reimbursement Plan include qualified health insurance premiums and basic preventive health services.
Is there a minimum or maximum number of participants that must enroll in a Health Reimbursement Plan?
No. Companies of all sizes can use a Health Reimbursement Plan. Additionally, there are no required minimum participation requirements, and the company determines the eligibility requirements during implementation.
Additional questions on Health Reimbursement Plans? Contact us. We’d be happy to help.
Additional Reading on Health Reimbursement Plans
How Healthcare Reimbursement Plans (HRPs) Work With New "Market Reforms"
This article outlines how Healthcare Reimbursement Plans comply with the new Affordable Care Act “Market Reforms.” >> Read more.
FAQ: Can I have an HRP and an HSA at the same time?
Employers, agents, financial professionals, and employees often have questions about Health Savings Accounts (HSAs), and how they work with a Defined Contribution Health Plan, such as a Healthcare Reimbursement Plan (HRP). A common question we receive is "Can an employee have an HRP and HSA at the same time?" The answer is: "Absolutely, yes!" >> Read more.
Who Can Administer a Healthcare Reimbursement Plan?
Healthcare Reimbursement Plans provide small and medium sized businesses an affordable health benefits solution. A common question from business owners, HR professionals, CPAs, and brokers is "who can administer the Healthcare Reimbursement Plan?" >> Read more.
HSAs vs. HRPs (Savings Accounts vs. Reimbursement Plans)
Which is better: A Healthcare Reimbursement Plan (HRP) or a Health Savings Account (HSA)? The answer depends on what you are trying to accomplish and whether you are an employer or an employee. For most employers HRPs are superior to HSAs. >> Read more.
Individual Health Insurance Reimbursement - An Overview
Under the Affordable Care Act, small businesses (<50 employees) aren't required to offer health insurance, but most want to. And, there are new advantages of individual health insurance such as the premium tax credits and guaranteed-issue coverage. All of these factors leave small business owners looking to invest their health benefit dollars in individual health insurance reimbursement. >> Read more.