I just accepted a position at a locally owned small business. Rather than offer a group medical plan, my employer says she will provide me with funds to help pay premiums for an individual health insurance plan that I pick myself. Is it truly allowed under the Affordable Care Act? Can I use the funds for my dental plan or other supplemental products?
Dear Recently Hired,
Congratulations on the new gig! The answer to the first part of your question is, yes, to an extent.
The 21st Century Cures Act, which President Obama signed into law on Dec. 13, 2016, includes an amendment to the Patient Protection and Affordable Care Act (ACA) and Internal Revenue Code of 1986 that allows certain employers to fund their employees’ individual major medical insurance premiums (i.e., not group plans) through a health reimbursement arrangement (HRA).1
Language in Title XVII, sec. 18001 of the 21st Century Cures Act states that employers with fewer than 50 full-time employees2:
- Can fund medical care expenses for their employees on a pre-tax basis, up to a maximum dollar amount of:
- $4,950 per individual
- $10,000 per family
- Pay or reimburse employees through HRAs to fund individual major medical insurance premiums
- Must give employees a written notice of at least 90 days before they become eligible
- Must report contributions on employee W2s
Any unused funds in your HRA may be carried over from year to year.
As for the second part of your question, whether or not these funds can be used to pay premiums for dental insurance, hospital indemnity coverage and other types of supplemental benefits, the answer is no.
The law applies only to minimum essential coverage sold in the individual market (i.e., on and away from the state-based and federally facilitated health insurance exchanges).3
That said, you may use the money you’re saving on major medical premiums to buy additional coverage that can help lower what you pay for out-of-pocket medical expenses. For instance, a hospital indemnity plan such as the Care Access Plan sold through HealtheDeals.com pays fixed benefit amounts that can help with healthcare bills from unexpected hospitalization or surgery. And, a medical gap plan such as Metal Gap pays lump-sum benefits that could be used toward paying your major medical deductible if you incur covered accident- and illness-related costs.
As always, if you have questions or want one-on-one help, use Agent Finder to search for local assistance or call the number at the top of your screen to speak with a certified advisor from HealtheDeals.com.