What happens if I dont give health insurance but reimburse premiums?

This is a very common question.  “Well, why don’t I just cancel the health insurance and give them the money for premiums?”  Under IRS Notice 2013-54 this arrangement is an “employer payment plans” and the “plan” would have to meet all the ACA requirements.  Since that would be impossible, you could be subject to $100/day excise tax.  Thats $36,500 a year per employee.


“Referencing Notice 2013-54, the IRS emphasizes that these employer payment plans are considered group health plans under PPACA. As group health plans, these arrangements are subject to the market reforms, including the prohibition on annual limits and the requirement to cover preventive care without cost-sharing.  These arrangements cannot be integrated with individual health insurance plans in order to satisfy the market reform requirements.”

Any written arrangement that ties payments to employees specifically for health insurance premiums or expenses would be subject to this issue.  So, just give them a raise (if you want), cancel the health insurance, and send them to the exchange.