White Paper & CPA Guide
Consulting & Benefit Administration
Edward A. Lyon, JD, National Tax Attorney & Consultant
Christy A. Quigley, President, ClaimLinx
Thomas J. Quigley, National Business Consultant
Rave Reviews for ClaimLinx:
“ClaimLinx has saved our company a lot of money”
- Kelly DeGregorio - Kraft Electric
“Excellent Service and Knowledge”
- Don Cain - Biehn Company
“We are a medium sized company dealing with the ever increasing affects brought on by a health
carrier monopoly In order to contain our costs we searched and found a workable concept and
solution to reduce our health care expenses. ClaimLinx introduced us to an innovative cost savings
concept that we implemented in April 2006, with the assistance of their professional staff members.
This method has reduced our health care costs, provided us with statistical reports to negotiate any
future health carrier rate increases, while helping our employees understand the importance of being
actively involved as consumers and making better health care decisions. We look forward to
continuing our relationship with ClaimLinx. “
- Sharon Wray - Harrison Concrete
“Our company has saved tens of thousands of dollars, ClaimLinx has made it easy and hassle free.
ClaimLinx can provide the benefits that WE want, not what the insurance company suggests. We
would highly recommend any company that wants to be smarter about buying health insurance talk
- John Moore - Ohio Metal Products
Who is ClaimLinx?
ClaimLinx specializes in consulting and the benefit The good news is you don’t have to feel that way
administration of self-funded Medical Expense there is a solution! Employers who participate in
Reimbursement Plans (MERP). Our services our Simple Option Solution (SOS) Program typically
include determining savings projections, designing save 10-80% per year. Without cutting benefits,
the benefit plan, processing claims, educating changing insurance carriers, or charging employees.
members and paying providers. ClaimLinx was And employers can play a part in these savings by
formed in 2004 by Christy A. Quigley. We are a understanding how it works.
Cincinnati, Ohio-based company operating as a
third party administrator in the State of Ohio. We A simple way of providing benefits is to only pay for
coordinate the processing of claims for over 6,000 “benefits used” as opposed to “buying insurance.”
members nationwide. Our team is committed to Insurers collect premiums to pay for claims, plus
providing clients with unprecedented service given more for administration and profit. Nationwide, a
by no other in the industry. Our employees strictly dollar of health insurance premium delivers just 85
adhere to all HIPAA regulations and guidelines as cents worth of benefits. What if employers could cut
enforced by the federal government. We strongly out some of this premium and deliver benefits
believe in the privacy of our clients, his/her directly? Now they can! ClaimLinx SOS Program
employees and any individuals with whom we uses three proven steps to help employers
contract for services. accomplish just that.
Contact Erika DeStefano, National Sales Director at 1. Raise Deductibles: You insure your home—but
email@example.com or (513) 677-6262 or not for a $40 plumber bill. Who could afford the
(800) 858-1772 to setup a consultation. coverage? You insure your car—but not for a
$40 oil change. It would cost a fortune! So why
Think it costs too much to stay healthy? insure employees for $40 office visits? Raising
If you think it costs too much to stay healthy, we’ve health insurance deductibles works the same
got bad news and we’ve got good news. The bad way, and cuts premiums up to 80%.
news, of course, is that you’re right. Health care
swallows nearly 16% of our gross national product, 2. Buy Back Benefits: Next, we add a Section 105
and topped $7,681 per person in 2008. medical expense reimbursement plan (MERP)
available through the IRS to let employers
Soaring health care premiums regularly make front- reimburse employees for medical costs incurred
page news. The average family premium, which for themselves and their families.
stood at $9,160 in 2003, will climb to $13,375 by
2009. How can employers afford to stay in the 3. Additional Options: Employers can implement
game? What will they do when their employees’ other options such as alternate funding or
health insurance costs more than their homes? putting employees on their spouse’s plan or
writing individual plans for dependents. Not only
does this shift risk away from the group plan, but
can add significant savings. In addition, self-
funding dental and vision provides even more
Family Premium Costs savings.
$12,680$13,375 What are the current tax options?
$10,880 Cutting insurance coverage is an obvious way for
reducing premiums. But cutting benefits creates
unhappy employees. ClaimLinx solution is to buy
back benefits for less than it costs to provide them
through insurance. Employers have several tax-
$2,000 advantaged choices for replacing lost benefits:
2003 2004 2005 2006 2007 2008 2009
Source: Kaiser Employer Health Benefits
(c) 2010, ClaimLinx, Inc. All rights reserved. Cl a mLinx
Our plan is considered “unfunded” under ERISA.
Health Savings Accounts begin with high- Plans with less than 100 participants file no
deductible insurance policies. Employers or Summary Annual Report or Form 5500.
employees then pre-fund savings accounts to
cover unreimbursed costs. But this means We generally design employers’ plan to mirror the
committing cash whether employees need it or benefits provided the prior year. These designs are
not. Employees can take accounts with them to ensure that no benefits will be lost by moving the
when they leave, which means employers may base plan to the new high-deductible policy. This
commit health-care dollars that never get used ensures employees do not lose benefits and limits
for their intended purpose. employer’s potential liability.
Flexible spending accounts (FSAs) let
employees defer income into pretax accounts for Step 1 – Keep Same Carrier, Same Benefits
out-of-pocket costs. But there’s little flexibility to
change deferrals. Big-ticket expenses like
braces for children’s teeth can exhaust accounts
early in the year. And employees have to use 1. Raise Base Plan Deductible
account balances by year’s end, or forfeit them.
Section 105 medical expense reimbursement Old Plan – High Premiums New Plan – Low Premiums
plans let employers reimburse employees, as – $ 0 EE Deductible – $ 0 EE Deductible
20% EE coinsurance 20% EE Coinsurance
needed, for medical expenses they incur for –
– $ 20 EE Office Visits
– $ 20 EE Office Visits
themselves, their spouses, and their – $5 Mil Policy Maximum
dependents.1 This lets employers pay just $1 for $5,000 – HSA Base Plan
$1 worth of benefits, when employees actually 35% Savings!
Healthcare reimbursement accounts (HRAs)
are Section 105 plans that let employers pre-
fund employee spending accounts and carry (c) 2010, ClaimLinx, LLC. All rights reserved.
balances from year to year. This means
committing cash to the plan whether or not
Buying back benefits through a MERP is financially
employees actually need it for covered costs.
a better option than pre-funding claims that may
never occur. Why not pay for claims only when they
We prefer the Section 105 plan to replace employee
occur? ClaimLinx can show employers how to
benefits because it offers the best combination of
design a plan so their savings is more than their
savings and flexibility.
How does the SOS Program work?
Step 2 – Section 105 MERP Implementation
The SOS Program allows employers to define who
they want to cover, what to cover, and how much to
Employers can’t discriminate in favor of highly 2. Buy Back Benefits
compensated employees.2 But they can use a Add §105(b) to deliver benefits
classification test, such as all participants in their
Define Eligible Employees Define/Deliver Benefits
group health plan,” to qualify participants.3 They
Must be nondiscriminatory Define eligible expenses
can exclude part-time, seasonal, short-term, and May use “classification” test: – Copays, deductibles, Rx
younger employees.4 Self-employed clients – “all participants in Employer’s – Diagnostic/testing
group health plan” Dental/vision/chiropractic
operating as sole proprietors can hire their “Safe harbor” exclusions:
– “Any eligible expense under
spouse and pay benefits through them.5 – Less than 25 hours/week IRC Section 213(d)”
Employers choose what to cover and how much – Less than 7 months/year
Less than 3 years service
to pay, up to the limits of Code Section 213(d).6
– Age 25 or under
Most clients choose simply to replace benefits
under their old “first dollar” plans. (c) 2010, ClaimLinx, LLC. All rights reserved.
Clients can reimburse employees or pay health
care providers directly.7
In order for employers to get the maximum cost employment tax savings add even more to his
savings, ClaimLinx can implement more options that bottom line.
can provide same or better benefits for employees.
These options are voluntary, but some such as
vision and dental can be incorporated into an overall Case 1 25% federal tax
financial strategy for the employer and the 6% state tax
employee. These options provide instant cash flow 15.3% self-employment tax
for the employer.
Step 3 – Additional Cost Savings $900/month premium $265/month premium
– no deductible/out-of-pocket – $5000 out-of-pocket max
– $15 co-pays – 80/20 drug co-pay
– $10/$20/$40 drug card – 100% after o-o-p max
$10,800 minimum pretax/year $8,180 maximum pretax/year
3. Additional Options – $2,700 federal savings – $2,045 federal tax savings
– $ 648 state savings – $491 state tax savings
– $ 0 SE tax savings – $1,252 SE tax savings
Alternate Funding – pull off spouses and dependents
for lower individual rates $7,472 after-tax cost $4,392 after-tax cost
Institute a “Spousal 105” – redefine eligibility to avoid
double-coverage; reimburse with 105 (include
Medicare) Our next client, a Cincinnati-area manufacturer, paid
$20,000 per month to insure 30 employees and their
Implement self-funded dental and self-funded vision
programs to decrease premium expenses families. ClaimLinx raised deductibles and installed
the Section 105 plan to buy back benefits. These
steps saved $84,00 per year.
(c) 2010, ClaimLinx, LLC. All rights reserved.
How is administration handled? Case 2 Manufacturer
The SOS program carves out part of the employers’ 10 Employees - single
current major medical coverage and allows 20 Employees - with family
ClaimLinx to be the employer’s third-party
Before – per month After – per month
administrator (TPA). ClaimLinx can deliver the
$20,000 major medical $12,000 major medical
same, or “better benefits” less expensively than the
$ 1,000 105 reimbursement
insurance carrier. This adds just one step for
employees, and it’s no more difficult than claiming
reimbursements under a flexible spending account. $20,000 total $13,000 total
Specifically, employees must show two cards at the
provider’s office and/or submit the “Explanation of
Benefits” (EOB) they receive from their major-
medical carrier. ClaimLinx determines coverage Savings
under Section 105 plans and will reimburse health
care providers and/or employees. Our enrollment
presentations educate employees, includes why To summarize the SOS Program:
employers adopted the SOS program and how Keep the Same Carrier
Claimlinx will manage it.
Provide the Same or Better Benefits
Save 10% to 80% on Costs
How much can clients expect to save?
Let’s look at two clients to see how much can be Restructure Finance of Benefits
saved. Our first, a self-employed consultant, paid Create instant Cash Flow
$900 per month to cover his family. ClaimLinx Personal Administration for Employees
replaced that expensive policy with a high- Customized Flexible Benefit Design
deductible plan from the same insurer. It meant up Ongoing Member Education
to $5,000 in out-of-pocket costs. But even if he hits
that ceiling, he saves nearly $3,000. Self-
What is the Implementation Process?
Employers who decide they would like to become a
ClaimLinx client and participate in the SOS Program
are taken slowly through the process.
1. Prequalification. The first meeting provides
employers with an overview of the SOS Program
and its benefits. Prior to the meeting ClaimLinx
may collect the current health insurance bill,
employee census, benefit summary and related
health information. We use that data to
customize a proposal and savings projection.
2. Presentation. The second meeting lets clients
review the savings projection with key decision
makers and outside advisors such as tax
attorneys, financial planners and accountants.
ClaimLinx also review the advantage of its
consulting and administrative services. If
employers want to move forward, they enter into
a written agreement. If the employer doesn’t
want to move forward we part friends and leave
the door open to a time when they might feel
more comfortable implementing the program.
Plan installation services include complete plan
documents; Summary Plan Descriptions; ERISA,
HIPAA, FMLA, and COBRA compliance tools; and
customized enrollment and administrative tools.
Ongoing administration services include claims
processing, monthly reports, claims analysis and
In addition to these service ClaimLinx provides: ClaimLinx
Refunds & Rebates 10260 Alliance Road
60+ years experience Suite 130
In-House Consulting Cincinnati, OH 45242
Live toll-free Customer Service Phone (513) 677-6262 or (800) 858-1772
Customized Benefit Designs Fax (513) 677-6263 or (800) 858-1913
Claims Analysis & Reporting www.claimlinx.com
Let ClaimLinx show you how to save10% to 80% on
“Dependent” has the same meaning as in IRC §152.
Rev. Rul 71-588; PLR 9409006
IRC §105(b) (“…amounts are paid, directly or indirectly….”)