Myth Busters: Are Medical Reimbursement Plans Too Expensive?

All Complementary Benefits Executive Health February 14, 2018

Medical reimbursement plans, also known as expense reimbursed insurance, have gotten a bad rap as an expensive supplemental option. However, like most things, this statement just isn’t that simple. Let’s look a little deeper.

When people think of medical reimbursement plans, they typically think of 1 of 2 things.

  • Health reimbursement accounts: As the name would suggest, these are accounts (HSAs, FSAs, HRAs) that provide additional insurance coverage, but these accounts are not insurance, which is what we are talking about here.
  • Executive reimbursement plans: These are supplemental insurance plans that have historically offered robust coverage to company leaders. (This kind of targeted coverage is possible because expense reimbursed insurance qualifies as an excepted benefit, as discussed in our first Myth Busters article.)

Huge Rewards

Executive medical reimbursement plans that offer robust coverage do tend to come at a steeper price than other supplemental options, like hospital indemnity or cancer policies. But it’s important to take into account how much members are actually getting for the price.

  • “100% coverage”: Today’s executive medical reimbursement plans offer a different way to achieve the same results of yesterday’s 100% plans. By reimbursing for all kinds of expenses, from everyday co-pays and Rx to LASIK and IVF, these plans can get employee leaders back to 100%. ArmadaCare’s executive medical reimbursement solution provides up to $100K of annual coverage.
  • Tax-efficiency*: Similar to the health accounts mentioned above, with our fully-insured executive reimbursement plan, premiums may be tax deductible for the company and benefits may not be taxable for the enrolled employee.*
  • Additional services: Our reimbursement products include services such as specialty referrals and travel emergency services.

Retention Costs

Another aspect to consider is what will happen if a company does not invest in additional coverage to address primary plan coverage gaps. Initially, this decision may appear beneficial as a way to cut overall healthcare costs. But decreasing costs in this area, can increase them in another: recruitment and retention.

It’s difficult to bring or keep talent on board with unimpressive health coverage. With today’s tight talent market, employees have plenty of employee opportunities available to them to explore if they are unhappy with their current employer offered health coverage. The costs of retaining important employees, or replacing them if they leave, can exceed the costs of investing in a reimbursement plan.

So will you really save money in the long run? Likely not.

Levels of Coverage

It’s important to note that executive medical reimbursement is no longer the only kind of reimbursement insurance plan.

What many people don’t realize is that today’s reimbursement products have the flexibility to offer different levels of coverage that are more suitable for different employee constituencies. That means there is more control over the cost, and more options to meet different budgetary constraints.

Of course, the plans with higher levels of coverage will have higher premiums and plans with lower levels of coverage will have lower price points. The beauty is in the broader options that allow for customization based on each company’s needs and each constituent group within a company.

Closing

So, are reimbursement plans too expensive? No, not when you consider how much you are getting. Plus, today’s expense reimbursed insurance options have a wide range of coverage options and price points that make them feasible for any company and budget. Plus, it’s an investment worth making once you look at the whole picture.

*This is not local, state or federal tax advice as each person and company is unique. It is recommended that you seek the independent counsel of a professional tax adviser.

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