Medical benefits

[testedmonkey]

What is the name of your state? California

When I was hired at my last job, medical benefits were supposed to kick in after 30 days. It was not explained to me that the company had each employee apply for an individual health plan that the company would then pay the premium on. My application for health coverage was rejected due to my medical history so I had no coverage until I got married a year later and went on my husband's plan. At that point, the company wrote me a separate check every month to compensate for the after-tax cost my husband was charged for my health coverage. In the year without coverage, they reimbursed me for any office visits or medications I needed for general illnesses. However, they declined to do so for certain other employees in the same situation.

No other employee who was hired during my 2 years there ever qualified for the individual plan. Another employee ended up getting her own individual plan after a year+ of no coverage, and the company pays the premium on it. The company still boasts to new hires that they offer medical benefits.

Is this practice illegal? It never sat right with me and now that I'm no longer there, I'd really like to know if what they're doing is against the law.

 

[cbg]

No, the practice is not illegal. It is not common and they should explain it better, but nothing in the law (a) requires them to offer health benefits at all or (b) prohibits them from handling it this way.

 

[testedmonkey]

Hmmm... sounds like the person who told me it was illegal doesn't know as much as I thought she did. She insisted that employers aren't allowed to pay for an employee's individual health plan directly. Something about it doesn't get taxed right.

Thanks CBG!

 

[cbg]

There's no reason why it can't be taxed properly as long as they're careful to set it up properly.

 

[testedmonkey]

clarification

I think that's where I'm confused. Our pay stubs made no mention of medical benefits. My other employers have shown on the pay stub how much either the employer paid for the benefits, or how much the employee paid for the benefits. Or both, if the employer pays up to X limit, then the employee pays for the rest. They would cut me a check for $125 per month out of the operating account to compensate for a part of the cost my husband was paying for me to be on his plan. It wasn't part of my paycheck and it didn't come out of the payroll account. (it says on the checks which account)

I don't mean to sound dumb here. I'm starting my own company and don't want to make the same mistakes my last employer did. Someone told me that how they paid for our benefits was wrong and I wanted to check that out. Better safe than sorry.

 

[cbg]

Let's be clear.

Unless I am gravely mistaken, the law does not prohibit an employer from paying for an employee's individual health coverage, as a benefit.

Yes, it would have to be set up and taxed properly. From what you're saying, I don't know if it was being taxed properly or not. Patty or Veronica might be able to give you better information on that.

But it was not illegal for the company to pay for an individual plan for you.

I would not recommend doing it that way when you set up your own company. You'll get better rates and better protections by purchasing a group insurance plan. I can give you some advice on that, and on setting up a new business from an HR standpoint since I've done it myself.

 

[testedmonkey]

advice

I'll happily accept any advice you could give me. I want everything I do with my own company to be as by-the-book as possible.

 

[cbg]

What kind of business are you looking to start? Will you have employees?

 

[Veronica1228]

Let's be clear.

Unless I am gravely mistaken, the law does not prohibit an employer from paying for an employee's individual health coverage, as a benefit.

Yes, it would have to be set up and taxed properly. From what you're saying, I don't know if it was being taxed properly or not. Patty or Veronica might be able to give you better information on that.

But it was not illegal for the company to pay for an individual plan for you.

I would not recommend doing it that way when you set up your own company. You'll get better rates and better protections by purchasing a group insurance plan. I can give you some advice on that, and on setting up a new business from an HR standpoint since I've done it myself.

Sorry, I'm late but I didn't know my help was needed. The following excerpt is from the IRS Publication 15 (Circular E) and should answer the tax question.

Medical care reimbursements. Generally, medical care reimbursements paid for an employee under an employer's self-insured medical reimbursement plan are not wages and are not subject to social security, Medicare, and FUTA taxes, or income tax withholding.

I hope that helps!