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Covered California Q&A

Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Pre-Tax Premium Reimbursement?

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Question: In a recent post you said, “pre-tax premium reimbursement for employees is debatable”. What is the debate? I thought the IRS had ruled against it.

Answer: Here’s a link to the the question and answer you referenced. Currently, the pre-tax reimbursement for individual health insurance premiums can be accomplished by enacting a stand-alone Health Reimbursement Arrangement (HRA). However, as you pointed out, the Department of Labor ruled that under the ACA, employer-sponsored HRAs may not be integrated with individual market coverage or with an employer plan that provides coverage through individual policies. Why? Because “Section 2711 of the Public Health Service Act (PHS) as added by the ACA, generally prohibits plans and issuers from imposing lifetime or annual limits on the dollar value of essential health benefits”. The debatable part comes from some HRA administrators who believe that if an HRA is structured properly - no lifetime limits and no annual limits - they can still be used to provide tax advantages.

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Thanks for answering someone’s recent question about pre-tax premium reimbursement. Our company had a consultant who sells some kind of HRA software come in, and he told us that in the ACA there is still a “loophole” that would allow employers with HRAs to reimburse for individual insurance if the HRA was structured as an FSA. Does that sound right to you? Our owner wants to drop coverage so that employees can get subsidies on the Exchange, but I am one of the few who wouldn’t qualify for a subsidy and am hoping that my company can kick in some pre-tax help on premiums.

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