3 things every doctor should know about the new health reimbursement arrangements

Congress recently created the ability for employers to use Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs) to pay or reimburse employees for their out-of-pocket medical expenses, including health insurance premiums. Here are three things every doctor should know about QSEHRAs before implementing them in their practices.

1. You can use a QSEHRA to pay for staff health insurance

In 2013 the IRS ruled that stand-alone medical expense reimbursement plans (MERPs) were considered group health plans and thus subject to Affordable Care Act (ACA) provisions. The IRS further ruled that doctors offering only a stand-alone MERP, without providing staff health insurance coverage, were subject to draconian penalties of $100 per employee per day, or $36,500 per employee per year. This included any reimbursements for health insurance premiums. This torpedoed medical expense reimbursement plans for practices, to the detriment of both doctors and staff.

Under the new law, eligible small practices (fewer than 50 full-time equivalent employees) can now offer QSEHRAs to pay or reimburse employees for their out-of-pocket medical expenses, including health insurance premiums. The draconian ACA penalties do not apply to QSEHRAs since they are not considered to be a group health plan.

2. A QSEHRA can be a big benefit to staff

For plan participants, annual reimbursements are limited to no more than $4,950 annually for individuals and $10,000 for plans that cover the employee’s family members. However, benefits must be offered on the same terms to all eligible employees, except for variations based on the health insurance policy premiums due to age and number of family members covered. This is a serious benefit to those who previously could not meet living expenses due to the high cost of health insurance. These benefits are delivered without payroll taxes, which results in big savings for the doctor and employee.