Medical Reimbursement Plan: Everything You Need to Know
A Medical Reimbursement Plan, also known as Medical Expense Reimbursement Plans or “MERPS,” is substantially similar to a Health Reimbursement Arrangement or “HRA.” 4 min read
Medical Reimbursement Plan
A Medical Reimbursement Plan, also known as Medical Expense Reimbursement Plans or “MERPS,” is substantially similar to a Health Reimbursement Arrangement or “HRA.” In fact, they are basically synonyms, with an HRA just being the more common phrase to use. However, unlike HRAs, there is no physical account linked to a MERP. Rather, the business will reimburse the employee for any health expense afterwards. With a ton of new benefit plans now available to health care providers, many businesses are quite interested in MERPs.
A Medical Expense Reimbursement Plan is just a way for employers to give tax-free money to their employees which can only be used to pay medical expenses. Employees pay for their own doctor visits, medicine, etc. and then the employer reimburses them. The employer can contribute exactly the amount they want so the cost of a Medical Expense Reimbursement Plan doesn't increase from year to year. Medical Expense Reimbursement Plans are incredibly flexible so it's very difficult to say exactly how they should be used.
A Medical Expense Reimbursement Plan allows businesses to pay for parts of their employees’ deductibles, copays, or co-insurance and other any qualified medical expense, tax-free. They are incredibly flexible and allow the business to come up with any sort of plan it likes. As a result, Medical Expense Reimbursement Plans are often associated with health care plans with higher deductibles. This will save the business and its employees on the amount of premiums while also continuing to offer a good quality health plan to the employee.
When deciding whether to opt for the Medical Expense Reimbursement Plan, the business will usually save a lot during the first year with the goal of stabilizing that amount in future years.
Advantages of a Medical Expense Reimbursement Plan (MERP)
There has been an enormous increase in the costs of health care in recent years. The category of people that this increase has affected the most is small businesses. It is very hard for a small business owner to cover his or her own costs of health care, let alone the health care costs for all of their employees.
Medical Expense Reimbursement Plans are appealing to small business owners because they are tax-exempt. Reimbursements are tax exempt, and any employer contribution are tax deductible business expenses. Once the employer reimburses the employee, the claim can be filed.
Medical Expense Reimbursement Plans are also incredibly flexible in that the business can create any type of scheme it wants. The business is able to decide how much pool of money will be available and how much of it will be disbursed to employees, as opposed to having a health insurance company dictate what it can and can’t do.
If a business or employer wants to change its plan under the Medical Expense Reimbursement Plan, it can easily do so because the Benefit Design Specialists is an independent third party that remains constant.
MERPS With Group Insurance
Employers raise the deductible on the group plan and reimburse employees for the difference in the deductible. A Medical Expense Reimbursement Plan with Group Insurance allows employers to self-insure a portion of their group insurance plan using pre-tax dollars which leads to big savings without any change in coverage.
MERPS for Vision/Dental
A Medical Expense Reimbursement Plan allow employers to only reimburse certain types of expenses. If an employer wants to offer a vision/dental plan without buying expensive insurance, they can offer a Medical Expense Reimbursement Plan to their employees that only reimburses for visions and/or dental expenses. Medical Expense Reimbursement Plans for Vision/Dental allows the employees to know that they're covered for basic expenses without costing the company absurd amounts of money on insurance premiums.
MERPS as Stand-Alone Health Benefits Plans
A lot of people have negative opinions about individual insurance, but those are generally based on misconceptions or horror stories from a decade ago. Consider in getting an agent that is knowledgeable to help you understand how Medical Expense Reimbursement Plan or HRA works.
Money from a Medical Expense Reimbursement Plan can be used to pay for individual insurance premiums. Employers can just offer the Medical Expense Reimbursement Plan and employees can use that money to buy their own individual policies rather than offering a group plan and a Medical Expense Reimbursement Plan. A Medical Expense Reimbursement Plan is fully deductible in the company.
Many companies use a Medical Expense Reimbursement Plan to cover ancillary health care services, such as vision or dental insurance, that are not usually covered by a group health care plan.
A Medical Expense Reimbursement Plan differs from a Flexible Spending Account in that funds aren’t set aside beforehand. There is no maximum or minimum amount by law, and with a Flexible Spending Account, you pay funds to an account and have to use these funds by the end of the year, otherwise the money disappears.
If you need help with your Medical Reimbursement Plan, you can post your legal need on UpCounsel’s marketplace.