Introduction to HRAs

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Your Introduction to MERPs

(Medical Expense Reimbursement Plan(s)

What is a MERP?

A MERP (Medical Expense Reimbursement Plan) is a medical reimbursement plan that allows an employer to reimburse an employee for uninsured health or accident expenses incurred by the employee or his dependents. A Medical Expense Reimbursement Plan falls into Section 105 of the Internal Revenue Code (IRS Tax Code). The major goal of the Medical expense Reimbursement Plan is for the employer to cut health benefit costs to his bottom line. You do this by purchasing a high deductible health plan to reduce your overall annual premium exposure. You then put a layer underneath your high deductible called a MERP. This allows you to "purchase back" claims that your employees incur that will be 100% tax deductible via (Section 105) for your corporation.

Here's how a MERP works

For example, many employers in the past years may have been able to provide a very low deductible, such as $200, for their employees. Healthcare inflation in the United States is estimated to be at nearly 21% per year and rising. Due to the rising health care costs this sort of plan is no longer a viable for the employer. If they decide to offer a $5,000 deductible, thus getting significant savings in the cost of their premiums annually. The employer then can then "purchase back" the deductible from his employees so that they are still only responsible for the first $200 of their deductible. Everything the employer buys back is 100% tax deductible. Only a small portion of the employees will use their entire deductible so the employer's exposure is only that which is used. The end result is savings on premiums by moving to a high deductible health plan and continued employee satisfaction as the employee still only faces a $200 deductible. It is a pay as you go system that can reduce costs to your bottom line. Average savings to clients on this program range from 20%-50% in comparison with a fully insured traditional plan.

Does you current consultant or broker manage the healthcare utilization on your health plan? Please take a look at the advantages of a MERP plan

MERPs can be a key component of A employer sponsored group health insurance plan


Medical Expense Reimbursement Plan