One of the questions we hear when outlining the features and benefits Gravie offers employers and employees is, “Is that even legal?”
The introduction of the Affordable Care Act (ACA) was accompanied by a host of new and often very complex laws and regulations. Looking at these guidelines without significant expertise in the area of tax and employee benefits law could lead one to conclude, at first blush, that Gravie’s business model is not compliant with the mandates set out by the Internal Revenue Service (IRS), U. S. Department of Labor (DoL) and the ACA. Particularly if you read the answer to question #1 on the DoL’s website:
Q1: My employer offers employees cash to reimburse the purchase of an individual market policy. Does this arrangement comply with the market reforms?
A: No. If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer's payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Therefore, the arrangement is group health plan coverage within the meaning of Code section 9832(a), Employee Retirement Income Security Act (ERISA) section 733(a) and PHS Act section 2791(a), and is subject to the market reform provisions of the Affordable Care Act applicable to group health plans. … Under the Departments' prior published guidance, the cash arrangement fails to comply with the market reforms because the cash payment cannot be integrated with an individual market policy.
The “cash reimbursement” referenced here is the key element that makes Gravie different from other non-compliant plans. When using Gravie you don’t reimburse employees for the purchase of a health plan; employers working with Gravie provide additional, taxable compensation that employees can use to purchase their own plan — if they want. After the employer selects who is eligible to receive this money, eligible employees can choose to “cash out” and receive the money their employer is offering in cash and use it on whatever they choose.
With Gravie, there’s essentially no direct link between the compensation and purchase of a plan. Gravie facilitates the payment of additional wages from employers to their employees, and because it is considered compensation, those funds are taxable to both the employee and the employer. But, because the overall savings on both sides are so significant, Gravie is still usually the best choice - and it’s perfectly compliant.
Compliance is just one reason Gravie makes sense. Here are just a few statistics that might have you considering the switch:
- Group coverage is becoming more expensive for employers and employees. According to the Kaiser Family Foundation, from 1999 to 2014, the cost for family coverage in a group policy has increased 191%, from $5,791 a year to $16,834 – more than double the rate of inflation over the same time period. (“Premiums and Worker Contributions Among Workers Covered by Employer-Sponsored Coverage, 1999-2014”)
- Organizations are opting not to offer group insurance. Of employers with high awareness of healthcare reform, 60% are likely to pursue an alternative to traditional group insurance and 30% of ALL employers are likely to do the same. (“How US Health Care Reform Will Affect Employee Benefits”)
- Employees are accepting of plans not sponsored by their employers. When asked, 85% of employees said they would remain on the job if their employer stopped offering employer-sponsored insurance, but 60% of those employees would expect increased compensation. Even if employers completely compensated employees for the change through other benefits or higher salaries, 30% of employers would still gain economically. (“How US Health Care Reform Will Affect Employee Benefits”)
The simple answer to the question, “Is Gravie compliant with ACA?” is yes. As you can see, it’s also a practical option that could save you and your employees money (our clients have saved, on average, 36%), and an approach your employees might very well embrace.
Would you like to know more? There’s a lot of great things about Gravie – being compliant is just, well…the fine print. We’d be happy to answer all your questions, so reach out using our Contact for Employers page, call 844.540.8701 or tweet us @gogravie.