There are specific HIPAA and ERISA regulations governing the distribution of individual health insurance policies at the workplace–basically restricting employer involvement with the sale or administration of employee Individual health insurance policies. The HRA administration platform utilized should ensure employer compliance with these regulations.
Confusing, Outdated and Unenforced State Insurance Regulations
HRA tax-free reimbursement by employers to employees for the cost of individual health insurance premiums is absolutely allowed in all U.S. States. Period.
In some states, there are confusing, outdated and unenforced insurance regulations stating or implying that the payment by an employer with less 50 employees of an individual policy premium could result in the insurance company having created a “group plan”– thus, requiring the insurance company to offer the same individual policy to all employees of the “small employer” regardless of health status.
Note that these regulations do not apply to employers, since state insurance departments regulate insurance carriers (NOT employers).
- When reimbursing an employee’s HRA claim through a HIPAA- and ERISA-compliant platform, employers are unaware whether the HRA reimbursement is for a doctor visit or a health insurance premium; and
- Insurance carriers are unaware if, after a policyholder pays a monthly premium, the policyholder later receives reimbursement from their employer for the premium.
As a further complication, several states such as many states recently began requiring small employers to offer either Section 125 (Cafeteria Plan) or Section 105 (HRA) tax-free reimbursement of employees’ individual health policy premiums.