If you are seeking to provide a tax advantaged healthcare reimbursement, such as a QSEHRA, to your household employee, you need to make sure it is ACA compliant. Let's delve into what it takes for a plan to be ACA-compliant and what might not meet those standards.
What is an ACA-Compliant Healthcare Plan?
An ACA-compliant healthcare plan is one that adheres to the regulations set forth by the Affordable Care Act, also known as Obama Care. These regulations are designed to ensure individuals and their families have access to essential healthcare benefits, thereby enhancing the overall quality of healthcare in the United States.
Key features of ACA-compliant healthcare plans include:
- Essential Health Benefits: ACA-compliant plans must cover essential health benefits, such as preventive care, prescription drugs, hospitalization, and maternity and newborn care. This ensures that individuals have access to a comprehensive range of services.
- No Pre-existing Condition Exclusions: ACA-compliant plans cannot deny coverage or charge higher premiums based on pre-existing conditions. This rule ensures that individuals with chronic illnesses or previous health issues are not left without coverage.
- Minimum Essential Coverage: To meet the ACA's individual mandate, plans must provide minimum essential coverage. This helps to ensure that most Americans have health insurance coverage, either through their employer or through the Health Insurance Marketplace.
- Affordable Premiums: ACA-compliant plans must be affordable for individuals and families, with cost-sharing subsidies available to lower-income individuals. The law sets limits on how much individuals should pay out of pocket.
- No Annual or Lifetime Limits: ACA-compliant plans are not allowed to impose annual or lifetime limits on essential benefits. This protects individuals from being left without coverage when they need it most.
What Might Not Be ACA-Compliant?
Not all health insurance plans are ACA-compliant. It's essential for household employers to be aware of what might not meet ACA standards. Non-compliant plans can include:
- Short-Term Health Plans: Short-term health plans are designed to provide temporary coverage and do not have to adhere to the ACA's regulations. While they can be a solution in some situations, they are not a substitute for comprehensive long-term health insurance.
- Healthcare Sharing Ministries: These faith-based organizations provide a form of cost-sharing for medical expenses but are not considered insurance. They are not subject to ACA regulations.
- Limited Benefit Plans: Plans that only cover specific health services or have low annual limits on coverage may not meet ACA standards.
Reimbursement Options for Household Employers
Household employers have various options when it comes to providing healthcare benefits to their employees. One popular choice is to include either a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) or an Individual Coverage Health Reimbursement Arrangement (ICHRA) in their compensation packages.
Both QSEHRA and ICHRA allow household employers to reimburse employees for their ACA-compliant health insurance premiums, thus helping employees access essential healthcare coverage. By offering a QSEHRA or ICHRA, you can ensure that your employees have access to the healthcare coverage they need, while also benefiting from tax advantages. If you would like to know more about the tax advantages of offering a QSEHRA or ICHRA, give us a call, 1-800-626-4829. One of our payroll and tax experts would be happy to walk you through how adding this benefit to your employee’s compensation can provide substantial tax savings for you both.