For many years, some “consultants” (and one in particular) have been telling employers that they can cancel their group policies, set up a Code Section 105 (IRC 105(h)) reimbursement plan that works with brokers to help select individual health policies and get the premium tax credits for Marketplace coverage. This is NOT permissible according to the new FAQ issued by the Department of Labor. There are several reasons given, which should finally close the door:
1) The arrangements are considered to be group health plans and thus no tax credit allowed
2) Just because an employer is not involved with plan selection/purchase does not prevent the arrangement from being a group health plan
3) Such arrangements are subject to market reform (under four separate notices) which prohibits annual limits and requires preventive care be offered without cost sharing. “Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, will violate PHS Act sections 2711 and 2713 among other provisions which can trigger penalties such as an excise tax.