Category Archives: Group Insurance

Don’t Reimburse Employees For Individual Health Insurance

Thousands of small employers reimburse or “pay a little extra” to reimburse employees who purchase individual health insurance…However, beginning this month huge fines are possible…even for a small family business of 2 employees if you reimburse employees for individual health insurance.

“Illegal reimbursements can also take on more subtle forms e.g. paying a higher wage in exchange for declining health plan coverage. Some of these indirect arrangements are also illegal. If you think this affects your small company, here’s someone you can talk to for free. Time is running out.”

Tax Deductibility Is Not The Main Issue Here

This is true whether or not you take a tax deduction for reimbursing these premiums!  We are referencing the latest IRS bulletin addressing the subject: Basically, the IRS argues such arrangements create the existence of a group health insurance plan…and since individual plans are not compliant with the same ACA regulations that apply to group health insurance, IRS conclusion…you are sponsoring an illegal plan!  The penalties are punitive, to say the least (read further for details).

Expensive Mistake If You Reimburse Employees Improperly

I don’t think we can overstate this:  it’s a mind-blowing change of policy that negatively impacts smaller employers. Recently, MarketWatch did a good job of bringing this subject to mainstream media, in this article:

“Under an employer payment arrangement, the employer reimburses participating employees for premiums paid for their individual health insurance policies or pays the premiums directly on behalf of participating employees….The penalty for running afoul of the market reform restrictions is $100 per-employee per-day, which can amount to $36,500 per employee over the course of a full year. (from MarketWatch:  The full story)

If you think this affects your small company, don’t focus on the problem, focus on the solution: here’s someone you can talk to for free. Time is running out.

Don't Reimburse Employees For Individual Health Insurance


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Small Biz Employers With Kaiser Plans Have 5pm, August 30, 2013 Deadline

This is an important reminder that Employers with 1 to 50 employees who sponsor a California Kaiser Permanente Group Health Plan have until 5:00pm PST Friday August 30, 2013 to file the Kaiser-Early-Renewal-Intent-Form.

 What Is The Kaiser Intention To Renew Early Form?

Simply stated, this form (Kaiser Small Business Form No. 60141913 (August 2013) informs Kaiser that you want 35 more days to think about their offer to change your anniversary date.   There is no commitment on your part.  We recommend you submit the form, as it changes nothing in your current arrangement with Kaiser, but it does buy you until October 4, 2013 to think about their offer.

 Which Employers Should Consider An Early Renewal?

  • Employers with a Non-Grandfathered Kaiser small group plan
  • And contract renewal dates in the first half of the year
  • And who have not made a prior renewal date change in 2013.

 I have Submitted The Form Already, What Happens Next?

Over the next few days (until October 4th), you have the opportunity to decide if you want to go through with a contract anniversary date change.  If you wish to proceed, then you must file an additional form by October 4, 2013, titled the Kaiser-Early-Renewal-Confirmation-Form, which confirms your intent to renew early for December 1, 2013.

 What Is The Advantage To Changing My Renewal Date?

First, employers with Grandfathered plan status probably should not change their anniversary date, unless your advisor/broker has recommended it.  All other eligible employers would consider the following factors:

  • Is your existing RAF (risk adjustment factor) 1.1 or .90?
  • Is it important to delay your renewal to keep costs down?
  • Is it not worth the hassle to delay the inevitable?

Remember, there are additional important issues to consider, and Kaiser warns that a group will bear all responsibility for its decision to accept the offer for early renewal including but not limited to the group’s compliance with the ACA and ERISA (see related story)..

Talk with your broker for answers, or leave us a comment at the end of the article.

Employers Dilemma- Early Renewal or Not?

A follow-up to this story was published in October can be be read here. Many insurance brokers (and insurers) are suggesting that Employers re-date the plan anniversary (aka “Early Renewal”) to delay certain aspects of Obamacare Affordable Care Act rules and possible penalties (see our related story). Is this a good idea?  Are there pros and cons to using a “plan anniversary date change” strategy?

At Coverage California, we present alternative points of view. The following article came from, which argues that merely changing the renewal date of the insurance policy, does not necessarily change the plan anniversary date under ERISA:

“Changing the renewal date on an insurance policy with the plan’s carrier does not change the plan year. Changing a renewal date to December may be allowed by the insurance company, but if the plan sponsor/employer does not change the plan year, their plan year may continue to be a calendar year. From a legal perspective, “plan year” is the year designated in the plan document. Plan years are set by board resolutions and reinforced by plan documents and the filing of 5500 forms.. ” [Full article available at Benecomplink]


Employer Plan administrators should seek professional advice from their advisors.  For a limited time, we offer a limited number of free Q&A sessions.  For details, refer to the Eventbrite invitation at this link::  Reserve Q&A time.