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  • InsideTrack
  • November 19, 2014

    Pitfalls to Avoid when Evaluating Health Insurance Options

    The open enrollment period to obtain or change health insurance plans under the Patient Protection and Affordable Care Act has begun. In this article, the third in a series on choosing health insurance plans, the State Bar of Wisconsin’s Insurance and Member Benefits Committee provides more information on navigating the system.

    Nov. 19, 2014 – This article from the State Bar of Wisconsin’s Insurance and Member Benefits Committee is designed to help State Bar members better understand and evaluate their health insurance options in light of the changes coming under the Federal Patient Protection and Affordable Care Act (ACA).

    It is intended to be informational and is not an advertisement for insurance or giving tax advice. In particular, this article addresses some misconceptions about what qualifies and what does not qualify as an employer-sponsored health plan, why it matters, and what it means for employers and employees.

    Misconception: Employer Payment of Individual Health Insurance Premiums

    With the changes that have come about through the ACA, some vendors have been marketing programs claiming that employers can drop their employer-sponsored group health insurance plans and instead reimburse their participating employees for the cost of the premiums forindividual health insurance policies to be purchased by their employees. Some of these vendors have claimed that their individual premium reimbursement programs can be done on a pre-tax basis for employees.

    The U.S. Department of Labor (DOL) issued written administrative guidance on Nov. 6, 2014, clarifying that that these programs are not permitted under the ACA.

    The DOL cited its prior written administrative guidance stating: 1) these arrangements will not qualify for pre-tax treatment; and 2) even an employer’s after-tax reimbursement of individual health insurance premiums paid by its employees will constitute an employer health plan and will run afoul of the ACA’s requirements. There are significant penalties possible for violating these ACA requirements.

    We encourage you to work with your own trusted tax, employee benefits, and insurance advisors to consider your specific situation, the possible options available to you, and potential tax consequences for each option.

    An employer wishing to provide financial support for its employees’ health insurance needs should consider either providing a group health insurance plan or just provide unrestricted taxable compensation to its employees that they can use for any purpose. Other plans such as stand-alone dental or vision plans are not subject to these ACA requirements.

    There are different rules that apply to State Bar members who are considered self-employed for benefits purposes. Tax-favored options may be available for individual health insurance policies. For more information, the DOL maintains a list of Frequently Asked Questions (FAQs) about ACA Implementation.

    Employer Reimbursement of Health Care Expenses

    Employers also need to be careful about programs that reimburse employees for their health care expenses. An employer’s reimbursement of health care expenses will often qualify as an employer health plan and will be subject to ACA’s requirements.

    This is true regardless of what the employer calls its reimbursement program. A Health Reimbursement Arrangement (HRA) or a Flexible Spending Account (FSA) can be adopted by an employer, but must meet specific requirements under the ACA. These generally include connection of the program with an employer sponsored group health plan.

    Unlicensed Health Insurance Providers

    The Wisconsin Department of Health Services has issued a guide to purchasing individual health insurance. This guide includes reference to a warning issued by the Wisconsin Office of the Commissioner of Insurance (OCI) regarding unlicensed health insuranceproviders. This OCI resource provides a link to a source to determine whether a health insurance provider with which you are working is properly licensed to do business in Wisconsin.

    All State Bar members are encouraged to utilize one of the resources below, or to connect with your own trusted tax, employee benefits, and insurance advisors to help you make the best coverage decisions for your unique situation.

    Professional Insurance Programs (PIP)

    Professional Insurance Programs (PIP) evaluates health insurance coverage options and has an online health insurance shopping portal for State Bar members to help them evaluate other coverage options through Wisconsin Physicians Service Insurance Corporation (WPS) and its subsidiary, Arise Health Plan, which may be beneficial to them. Contact PIP at (414) 277-0154 or toll free at (800) 637-4676.

    Bultman Financial Services (BFS)

    Bultman Financial Services (BFS) will offer personal assistance in evaluating health insurance coverage options and State Bar members have access to the GOHealth online health insurance shopping portal to help them evaluate other coverage options. Contact BFS at (262)782-9949 or toll free at (800) 344-7040.

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