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setting up individual health plans under a section 125 could be illegal.
- 1,459
ABC, can you explain further. It has caught on like wild fire in these parts and brokers are doing it without a second thought.
- 4,096
A section 125 is for qualified group benefits.
In your state is an individual health insurance policy considered qualified?
There is some debate on this topic. Currently Golden Rule has been developing a list bill for individual policies which can be set up under the section 125 rule. When I asked if this is legal they could not answer.
So if there Individual health plans in place under a sec 125 and an employee is denied coverage that employee could show damages.
If you view the IRS code differently please let me know.
- 1,459
The administrators I use all allow it under a "individual premium reimbursement" provision in the 125 plan. My state doesn't allow list biling for individual health, the employee pays the premium out of their pocket and shows proof of payment to get a reimbursement from the TPA.
If you are breaking up a group and going this route, there are some things to be concerned about. If no plan is in place currently, I don't see how an employee could claim damages.
From the IRS standpoint, I can't imagine all the TPAs are specifically stating it's allowed if the correct provisions are written in the 125 plan document if it was a grey area.
As far as making it a viable option in my state, there is a high risk pool in that is competitive. Premiums can not be more than 25% of above the average private market rate.
If you are breaking up a group and going this route, there are some things to be concerned about. If no plan is in place currently, I don't see how an employee could claim damages.
From the IRS standpoint, I can't imagine all the TPAs are specifically stating it's allowed if the correct provisions are written in the 125 plan document if it was a grey area.
As far as making it a viable option in my state, there is a high risk pool in that is competitive. Premiums can not be more than 25% of above the average private market rate.
- 4,096
Full Throttle
Please have the TPA's you are using site the area in the IRS code that makes it legal to purchase an individual health insurance policy under the tax shelter of a section 125.
Every source that I have every talked to about this would not put it in writing that it was legal.
Please have the TPA's you are using site the area in the IRS code that makes it legal to purchase an individual health insurance policy under the tax shelter of a section 125.
Every source that I have every talked to about this would not put it in writing that it was legal.
- 1,459
Will do, curious to see if I get the same reaction.
- 4,096
I've used Core Docs and they are reasonably priced and supply what is needed to do the job. I am not with the company.
There is much confusion about this subject and it can be tied back to HIPAA. [/font]
Individual policies have been used in Section 125 plans from the beginning. Then HIPAA arrived in '96. HIPAA prohibits discriminating (eligibility and premium contributions, see ERISA) against individuals on health status. If an employer "helps" employees with the purchase of individual policies it could be construed that this is a "group health plan" and thus subject to HIPAA. And since the Individual Policy is subject to underwriting, you automatically get a conflict with HIPAA.
Now, there are many interpretations of whether this is a problem or not. But if you read the treasury dept regs (Prop. Reg. § 1.125-1(m), 72 Fed. Reg. 43953 (Aug. 6, 2007) in August of 2007 they affirmed the use of 125 to be used to pay employee individual health insurance premiums. There are other arguments, but if treasury was ok with individual premiums in the 125 plan, you should be too.
Some states may not allow the deduction on their state returns.
Individual policies have been used in Section 125 plans from the beginning. Then HIPAA arrived in '96. HIPAA prohibits discriminating (eligibility and premium contributions, see ERISA) against individuals on health status. If an employer "helps" employees with the purchase of individual policies it could be construed that this is a "group health plan" and thus subject to HIPAA. And since the Individual Policy is subject to underwriting, you automatically get a conflict with HIPAA.
Now, there are many interpretations of whether this is a problem or not. But if you read the treasury dept regs (Prop. Reg. § 1.125-1(m), 72 Fed. Reg. 43953 (Aug. 6, 2007) in August of 2007 they affirmed the use of 125 to be used to pay employee individual health insurance premiums. There are other arguments, but if treasury was ok with individual premiums in the 125 plan, you should be too.
Some states may not allow the deduction on their state returns.
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workablesolutns
New Member
Hi there! We're a TPA for pre-tax plans. I do agree it can be tougher to communicate the concept behind the savings for these benefits but we find education really works and once you break through that barrier, employers AND employees are very satisfied with the products simply because they're getting more bang for their buck on both ends. For a quick tutorial, our newest employee Benny Benefit illustrates the main concepts in this video illustration (WorkableSolutions.com/CDHP) which was created for both brokers new to selling consumer driven as well as a tool to demonstrate it to clients. If there's anything we can do to help further, don't hesitate to contact us via the website's broker request section or send me a PM. It's one of those things that once you get the hang of it, it's a piece of cake but it can be overwhelming at first. Good luck!!!
