With the cost of traditional health insurance on the rise, premium reimbursement plans are becoming a popular, affordable alternative. By using a compliant premium reimbursement provider, an employer can reimburse individual health insurance premiums tax-free and administer the program in five minutes per month.
Editor's note: This article was last updated in 2014. HRAs are the modern way to reimburse health insurance premiums. Learn more about HRAs.
Partnering with the right premium reimbursement provider can make or break the success of the health benefits program. When evaluating premium reimbursement solutions, here are ten questions to ask to find a compliant and credible provider.
Once an employer makes a decision to offer a premium reimbursement plan, the set-up process should take less than an hour to complete. This process includes designing the plan, enrolling their employees, and downloading the required legal plan documents.
Look for a premium reimbursement provider who offers paperless setup and employee enrollment along with a software platform to administer the plan in five minutes per month.
Select a premium reimbursement provider that offers plan design flexibility, including cost-sharing options. The provider should also allow the option to set up differing allowances based upon employee class or family status with automatic monitoring of HIPAA and ERISA discrimination compliance rules.
With a premium reimbursement plan, employees will have the option to purchase individual health insurance directly through the Health Insurance Marketplace or through an insurance broker. Ideally, the premium reimbursement provider will provide resources to aid employees in the selection of a plan that fits their healthcare needs.
Premium reimbursement providers should offer employees several different ways to submit their requests for reimbursement such as online, fax, email, and mail. Most employees will submit requests online, so look for a provider who has an easy-to-use online software platform for submitting requests.
Reimbursement requests should be processed within 48 hours of submission and should not be rejected for improper submission or incomplete documentation without multiple contact attempts. Additionally, employees should have access via their online account, telephone, email and fax to inquire about any requests they have questions on. Each reimbursement request should have a clear audit trail to meet appropriate regulatory guidelines, including IRS, HIPAA, ERISA, ACA, etc.
With a premium reimbursement program, reimbursements are paid directly by the employer to the employees on a pre-tax basis. This eliminates the need for pre-funding and third party accounts and ensures that the funds stay with the company until the requests are approved by the premium reimbursement provider.
Look for a provider that offers easy integration with the existing payroll system to make recording the premium reimbursements simple and hassle-free.
Optimally, employees should be notified via email at different stages of their request, just as they would a Fed-Ex package.
For example, look for a premium reimbursement provider who sends email updates to employees after they submit a request, when the request has been approved (or if additional information is needed to approve the request), and when the reimbursement is being added to payroll.
Look for a premium reimbursement provider who offers responsive support, available via email, online, and telephone.
A credible premium reimbursement provider should offer data to support the success of their solution, including case studies and client testimonials. The provider should also offer data on their client retention rate and examples of real-life cost savings for their customers.
Typically, a premium reimbursement provider will charge a one-time plan setup fee and a monthly administration fee per employee. Look for a provider who does not require pre-funding of allowances, and who does not charge plan design change fees or annual renewal fees.
A good premium reimbursement provider should provide each employer with a dedicated support person to manage their account and help with any administrative questions. Support teams for employees should be well-educated on premium reimbursement, compliance, and healthcare reform.