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Administrator: Employers CAN still help workers buy individual policies

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A benefit plan administrator says small and midsize employers can still replace group health plans with individual-policy-based programs without violating the Patient Protection and Affordable Care Act (PPACA).

American Health Resources says it has found a PPACA-compliant way for employers to use personal accounts to help workers choose and pay for their own health benefits packages.

Officials at the “tri agencies” — U.S. Department of Health and Human Services (HHS), the U.S. Treasury Department and the U.S. Labor Department — have teamed up to oppose some strategies employers might use to replace traditional group health plans with efforts to encourage employees to buy their own individual coverage.

In September 2013, for example, the Labor Department said a stand-alone health reimbursement arrangement (HRA) program used to help workers pay for individual coverage would be subject to the PPACA group health plan requirements. The HRA would, for example, would have to offer unlimited annual and lifetime benefits, department officials said.

See also: Labor rejects cash-for-coverage strategies

Kent Utsey, president of American Health Resources, says his company has come up with a PPACA-compliant individual-coverage-based program by reading two key batches of PPACA guidance, Internal Revenue Service (IRS) Notice 2013-54 and IRS Notice 2015-17carefully.

The tri agencies have not actually been prohibiting employers from helping employees buy individual policies, Utsey said in an e-mail interview.

“What they are trying to do is maintain a clear definition of what constitutes a health plan, and is therefore subject to the rules under [PPACA], so that there is no ambiguity or wiggle room,” Utsey said. “If an employer gives money that can only be used to buy health insurance, and that money is not available otherwise, it is an ‘employer payment plan,’ which is, by definition, a health plan, and subject to [PPACA].”

But, if an employer increases employees’ compensation to help them pay for individual coverage, and the employer does not require the employees to use the additional cash to pay for health insurance, “it’s not a plan,” Utsey said. 

In IRS Notice 2015-17, IRS officials say that an employer can provide cash, information about health coverage and information about PPACA premium tax credits without creating an employer payment plan, Utsey said.