Reimbursement for Health Insurance Premiums Under ACA

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As companies continue to look for the most cost effective ways to provide health insurance to their employees, they may be tempted to reimburse the employees for coverage obtained outside of the business. Even before the ACA, it was not uncommon for employers to reimburse tax-free some or all of the premiums employees incurred to acquire their own health insurance.

However, under the ACA, such reimbursements constitute a group health plan. As such, the employee reimbursement arrangement will cause the business to be subject to a $100 per day per employee penalty. This applies to any business, no matter how small.

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