Health Care Reform Developments Week of May 26, 2014
May 27, 2014
Health Care Reform Update: Week of May 26
IRS Releases More Health Care Reform FAQs
The Internal Revenue Service (IRS) recently updated its “questions and answers” related to the
employer pay or play provisions of the Patient Protection and Affordable Care Act (PPACA). It also
released FAQs regarding employer payment plans that reimburse employees for premiums paid for
individual policies purchased in or outside the public health exchanges (also known as Marketplaces).
In “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable
Care Act,” the IRS covers a variety of implementation issues related to the employer pay or play
mandate. The recently added questions address the following issues:
• What are the consequences if an employer offers health insurance coverage to all full-time
employees but does not offer dependent coverage?
• What are the consequences to an employer that offers health coverage to all of its full-time
employees and dependents but one of the employees’ dependents enrolls in coverage through
a public exchange and receives a premium tax credit?
• Who certifies that a company’s health insurance coverage meets the minimum value
• Must an employer still offer insurance to its full-time employees to avoid a pay or play
penalty if all of its employees obtain health insurance coverage through another source?
• How does an employer determine if it is part of a controlled group under the pay or play
• What is the difference between seasonal “employees” and seasonal “workers?”
• How does an employer measure an employee’s average hours worked if that employee works
for multiple companies, or for two different subsidiaries of a parent corporation that forms a
The IRS’ FAQs on employer payment plans detail the consequences to an employer if the employer
does not establish a health insurance plan for its own employees, but reimburses those employees for
premiums they pay for health insurance (either through a qualified health plan in the Marketplace or
outside the Marketplace).
The IRS first addressed the issue of pre-tax employer reimbursement of individual health insurance
premiums in Notice 2013-54 and the Department of Labor’s Technical Release 2013-03 (for more
information, please see Willis’ September 16, 2013, News Flash, “ Federal Regulators Have Been
Busy; Two New Developments.”) The IRS considers these types of “employer payment plans” to be
group health plans under PPACA. As such, they are subject to PPACA’s coverage reforms such as
the prohibition on annual dollar limits on essential health benefits and the requirement to cover
preventive care services without cost-sharing. As explained in the earlier guidance, these
May 27, 2014
arrangements must be integrated with group health plan coverage in order to be compliant with those
provisions – they cannot be integrated with individual policies. An employer offering such a non-
integrated plan would be subject to penalties of up to $100 per day, per applicable employee under
section 4980D of the Internal Revenue Code. This translates to a penalty of $36,500 per year, per
The earlier guidance did note that if an employer pays or reimburses health insurance premiums
(including premiums for individual health insurance) on an after-tax basis, that arrangement would
not be considered to be a group health plan that is subject to PPACA’s coverage reforms.
This information is not intended to represent legal or tax advice and has been prepared solely for informational
purposes. You may wish to consult your attorney or tax adviser regarding issues raised in this publication.