Penalty Steep for Employer Reimbursing of Individual Health Insurance Plans

In their May 19, 2014 article, EBC reported that the IRS had reiterated its position that its September 13, 2013 guidance prohibits an employer from paying for or reimbursing the cost of individual health insurance plans purchased by their employees on a pre-tax basis.

What is worth noting is that in addition to the guidance that such a practice fails to comply with the no annual limit on essential health benefits and preventive care without cost sharing provisions of the Affordable Care Act (ACA), the IRS took the time to specify the potential penalty for failing to comply; namely, that the employer is subject to a $100 per day per employee per provision penalty, which could be as much as $36,500 per year per employee per provision.

Clearly, the IRS is aware that some employers and brokers have continued to question whether the IRS’ September guidance applied to arrangements to solely reimburse or pay the premiums pre-tax for individual health insurance plans. Through the most recent guidance, the IRS made it clear that these arrangements do not comply with the ACA and subject the employer to severe potential penalties for continuing the arrangement.

Good News for Blue Cross Blue Shield of Arizona Customers

Today the Arizona Department of Insurance (DOI) announced that insurers may renew grandmothered plans – affecting members who purchased plans between March 24, 2010, and December 31, 2013, for up to two years.

We are very pleased to announce this decision.  It provides Blue Cross Blue Shield of Arizona customers choice, as well as peace of mind if they want to keep their existing plans, until the end of 2015.

Blue Cross Blue Shield of Arizona will extend grandmothered plans for at least one year and assess the impact for subsequent years. As always, we will provide updates as decisions are made.

If you are a Blue Cross Blue Shield non-group customer, you will continue to follow their standard renewal process. You can expect to receive a renewal notice and information about any changes to benefits or rates. Blue Cross Blue Shield of Arizona’s goal is to make sure you understand their options.

Blue Cross Blue Shield of Arizona issued the following media statement. (more…)