Employer Paid premiums for employee medical insurance are deductible by the company whether the coverage is under a group policy or individual policies. Reg. Sec. 162-10(a)
The employee need not report the amount paid by the employer as current income. IRC Sec. 106
When an employee pays the premium and is then reimbursed by the employer, the amount received is not included in the employee's gross income. IRC Sec. 106; Rev. Rul. 61-146, 1961-2 C.B. 25
Benefits paid under the insurance plan, which reimburse the employee for payments made for hospital, surgical or other medical expenses, are not included in the employee's gross income.
Group medical plans are an attractive fringe benefit because personally paid medical insurance premiums and medical expenses are only deductible in excess of 7.5% of the taxpayer's adjusted gross income. IRC Sec. 213
Under current law, this deduction may be further reduced or eliminated through the phase-out of deductions for persons with incomes in excess of certain amounts.
Self-insured medical reimbursement plans which favor employees who are officers, shareholders or highly paid employess may not qualify for the above tax benefits.
The code sets certain eligibility requirements for self-insured plans, similiar to those applied in qualified retirement plans, which are designed to discourage discrimination. IRC Sec. 105(h)
The Health Care Portability and Accountability Act of 1996, signed into law on August 21, 1996, expanded the availability of coverage under group health plans. Effective with plan years begining after June 30, 1997, the Act:
A) Limints exclusions for pre-existing
B) Prohibits discrimination in eligibility or premiums solely on basis of an individual's health situation.;
C) Guarantees renewability for those employers sharing in multi-employer plans; amd
D) Provides penalties for employers who do not comply with the law.
This document was last modified on July 27, 1999 by LMLeber
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