Rants, Raves & Revelations

Individual Health Plans At The Work Place: Department Of Labor Guidance Is Needed

In our employer provided health care system, 40% of employers do not offer health insurance. The news coming out of the U.S. Census Bureau is not encouraging: more employers have been forced to drop coverage because of unsustainable increases in premium — adding to the number of uninsured workers.

Workers have always looked for benefits at their jobs. Consultants, agents and brokers are pioneering the idea of providing individual health insurance plans at the workplace. Many have suggested the use of a Health Reimbursement Account (HRA) as a tax advantage financing approach to help fund individual health insurance. In this scenario, employers would be able to define their contributions to the HRA, and workers would be able to use these funds for the premium payment of their individual plans tax-free.

Why HRAs Might Not Be The Answer
While the IRS may not have a problem with this type of reimbursement plan, you must still consider existing Employee Retirement Income Security Act (ERISA) compliance issues, and how the Department of Labor (DOL) may view this funding arrangement.

Remember, ERISA does not allow discrimination based on evidence of insurability. Consequently, HRAs may not be the answer to providing individual health insurance benefits at the workplace.

A better way may be to establish a Section 125 Cafeteria Plan using employer-funded credits to help finance individual health insurance plans. This will still solicit employer contribution and allow them to cap their costs. Here’s how it works:

• Workers who purchase low-cost High Deductible Health Plans (HDHP) that can be used with an HSA can deposit these credits tax-free into their HSA.

• Workers who may be uninsurable can use these credits tax-free for out-of-pocket medical expenses through an FSA.

• Workers wishing to purchase a plan that is not an HDHP can elect to take the credit in the form of cash and apply it toward the premium of the plan they selected.

While income tax would be owed on the monies applied towards the premium, the net worker savings is substantial and make premiums more affordable.

It makes sense for workers to find access to affordable health insurance where most look for benefits… at the workplace. Using individual policies has merit, as health care becomes more a personal responsibility.

Jordan Wishner
Flexible Benefit Service Corporation
“Practitioners in Account Based Health Care”
www.flexiblebenefit.com