5 Roads to Healthcare Reimbursements

The purpose of this publication from the Evangelical Council for Financial Accountability (ECFA) is to present highly focused information on the healthcare reimbursement aspects of the Affordable Care Act (ACA).

This resource has been compiled and published as a free resource from the Evangelical Council for Financial Accountability (ECFA). It is designed to bring greater clarity to the maze of issues and alternatives surrounding healthcare reimbursements under the ACA. There are a number of important factors to consider when evaluating which option may be best suited for your church or ministry. We highly recommend seeking the advice of professional counsel to assist in your decision-making and to help guard against possible liability exposure for noncompliance. 

You can download the full booklet in the above PDF. Here is a summary of the full document: 

ROAD 1: Employer Pays for Individual Health Insurance Coverage

Summary: If church and ministry employers have been paying or reimbursing the cost of individual health insurance policy premiums for employees (on a pre- or post-tax basis), they should STOP before June 30, 2015 and consult with their professional tax advisors on appropriate next steps. While payments under these plans may not constitute taxable income to employees, more importantly, they may subject the organization to significant tax penalties for noncompliant reimbursements under the ACA. (Note: This represents a major shift from what has been common practice at many smaller employers over the last several decades.)

ROAD 2: Employer Pays Out-of-Pocket Medical Expenses (Not in Conjunction with Group Coverage)

Summary: If church and ministry employers have been paying or reimbursing out-of-pocket medical expenses of their employees without a formal plan offered in conjunction with qualified group health insurance coverage, they should STOP immediately and consult with their professional tax advisors on appropriate next steps. Not only would payments/reimbursements of out-of-pocket medical expenses presumably constitute taxable income to employees, but even more importantly, they may subject the organization to significant tax penalties for noncompliant reimbursements. (Note: This represents a major shift from what has been common practice at many smaller employers over the last several decades.)

ROAD 3: Employer Makes No Healthcare-Related Payments

Summary: Increasing overall taxable compensation to employees without tying the raises to healthcare-related payments may be attractive to some smaller employers as a way to avoid penalties associated with noncompliant reimbursements and to offset the economic burden to employees who are no longer allowed to receive reimbursements (taxable or tax-free) for healthcare-related costs.

ROAD 4: Employer Pays for Group Health Insurance Coverage

Providing qualified group health insurance coverage to employees offers the most tax advantages of all the options, but it also may be cost prohibitive for some smaller churches and ministries, depending on coverage needs and availability.

ROAD 5: Non-Insurance Arrangements: Health Care Sharing Ministries

Organizations considering the option of health care sharing ministries should review the tax implications with the health care sharing organization and their professional advisors.