3 ways new PPACA employer rules could hit your clients

If the employer tells the workers to use the money to buy health coverage, that qualifies as “group health plan coverage” under Internal Revenue Code 9832(a) and other laws.

2. Your client offers workers brain tumors or other high-risk conditions cash to leave the standard group health plan.

Officials say that arrangement would violate both the Employee Retirement Income Security Act and the Public Health Service Act. 

Offering only high-risk employees a choice between cash and coverage constitutes discrimination based on health factors, officials say.

One reason is that, from officials’ perspective, offering a sick employee cash to leave the plan means that the true cost of health coverage for that employee is the out-of-pocket premium that all enrollees pay, and the amount of cash that the employer offers the employee to leave the plan. If an employee who would normally pay $2,500 for coverage is offered $10,000 to leave the plan, officials treat $12,500 as the full price the employee must pay to stay in the group health plan.

3. Your client is putting cash into an Internal Revenue Code 105 reimbursement plan and having workers use the cash in that plan to pay for exchange coverage.

Officials say they have heard that some vendors are selling IRC Section 105 exchange shift programs. 

One problem is that the programs are group health programs, and employee participation in the programs makes the employees ineligible for PPACA exchange subsidies, officials say.

Another problem is that the Section 105 program itself would be subject to all of the PPACA rules that apply to group health plans, such as the requirement that the plans cover basic preventive services without imposing deductible or co-payment requirements on the enrollees. Because the program would not meet the PPACA group health plan requirements, the employer could end up having to pay penalties, officials say.