Introduction to SIMRP

Below is an excerpt from the article titled "20 Questions about Establishing a Health & Wellness Program in the Workplace - Opportunities for Tax and Cost Savings" Written by Peter Karl and Dominick G. Mondi*

For employers struggling with the rising cost of health insurance and ancillary benefits, a self-funded healthcare platform may be the answer to increasing employee benefits, while containing costs. Employers know all too well that although it is expensive to pay for employee benefits, it is still cheaper than losing talented employees with valuable experience. With average health insurance premiums rising faster than the consumer price index, employers are turning to consumer-directed health plans (CDHPs) and shifting more of the burden to employees through higher premium contributions, deductibles, copays and coinsurance. The authors answer 20 questions on how Wellness and Integrated Medical Plan Expense Reimbursement programs (WIMPER), provide incentives that allow employers to give cash reimbursements to employees, for individual and family medical care, as a result of participating in health and wellness plans. This follows the intent of the Affordable Care Act (ACA) which describes strategies to reward quality care through establishing payment structures that provide reimbursement for implementing wellness and health promotion activities. The healthcare platform is beneficial since it results in additional employee benefits, while also reducing costs for both employers and employees.

What is a Self-insured Medical Reimbursement Plan (SIMRP)?

A self-insured medical reimbursement plan (SIMRP) is a separate written employer plan, which reimburses employees for medical expenses that are not provided by either an accident and health insurance policy or a prepaid healthcare plan (e.g., an HMO) that is regulated under federal or state law. In its simplest form, a Section 105 SIMRP is a direct reimbursement plan that allows an employer to pay employees money for medical care expenses, such as insurance premiums.

How is a SIMRP structured?

A plan document is required to establish a SIMRP and should include which medical expenses are reimbursable, how reimbursements will be made and who is eligible. A SIMRP is considered to be a group health plan subject to the ACA which prohibits limiting coverage for essential health benefits. Because insurance premiums are not considered to be essential the plan may limit total reimbursements.

What are the eligibility requirements to participate in a SIMRP?

Eligibility to participate in a SIMRP must be satisfied by both of the following tests:

Percentage test. The plan must benefit 70% or more of all employees or, 80% or more of all employees who are eligible to benefit under the plan (provided 70% or more of all employees are eligible to benefit under the plan).

Classification test. The plan must benefit all employees who qualify under a given classification and cannot discriminate in favor of highly compensated individuals. Although certain employees may be excluded from consideration, it must be uniform for all participants, but may establish a maximum reimbursement limit.

The following classification of employees may be excluded from consideration. Workers who—

• Have not completed 3 years of service prior to the beginning of the plan year,

• Have not attained age 25 prior to the beginning of the plan year,

• Are part-time employees (less than 35 hours per week),

• A re part of a collective bargaining agreement, or

• Are nonresident aliens who receive no earned income.
  

Can employers create their own self-funded healthcare platform to allow employees to participate in a wellness plan that provides payment for ancillary or supplemental health benefits in a cost-effective way?

The ACA increased incentives for employers to adopt self-insured healthcare programs. More focus is being placed on consumer based approaches with an emphasis on preventative care. One approach is to establish a Wellness and Integrated Medical Plan Expense Reimbursement (WIMPER) program. This unified health care approach provides a tax-advantage, affordable means to purchase secondary health insurance products. A medical insurance plan along with a well-designed wellness program encourages employees to take personal responsibility to help minimize healthcare costs. When medical and wellness plans are integrated with a SIMRP, employees that participate in the wellness plan can be rewarded with cash reimbursements to cover medical expenses.

The full article can be viewed here.

*Peter A. Karl III. JD, CPA, is a partner with the law firm of Paravati, Karl, Green & DeBella, LLP in Utica, N.Y., and a professor of law and taxation at the SUNY Polytechnic Institute (Utica-Rome). He is a member of The CPA Journal Editorial Advisory Board.

Dominick G. Mondi, is the president of Mondi Insurance & Benefit Solutions in New Hartford, N.Y., focusing on innovative employee benefits.