The Internal Revenue Service has ruled that employers are not in compliance with the Affordable Care Act if they simply reimburse employees for buying insurance through one of the exchanges instead of establishing a health insurance plan for employees.
The ruling effectively prevents employers from “dumping” their employees into the new health exchanges rather than providing workers with health coverage, according to
The IRS posted the information in the form of
In response, the IRS pointed out that under
“As explained in Notice 2013-54, these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing,” said the IRS. “Notice 2013-54 clarifies that such arrangements cannot be integrated with individual policies to satisfy the market reforms. Consequently, such an arrangement fails to satisfy the market reforms and may be subject to a $100/day excise tax per applicable employee (which is $36,500 per year, per employee) under section 4980D of the Internal Revenue Code.”
Notice 2013-54 also explains how the Affordable Care Act’s market reforms apply to certain types of group health plans, including health reimbursement arrangements, health flexible spending arrangements and certain other employer health care arrangements, including arrangements under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy, the IRS pointed out.
For further information, the Labor Department has also issued a similar notice,
Emplyers who have fewer than 50 full-time employees or the equivalent are not subject to the Employer Shared Responsibility provisions of the Affordable Care Act and can use the health insurance exchanges to offer coverage to their employees.