medical insurance reimbursement plan expenses

How to know if your business can deduct medical insurance reimbursement plan expenses?

The decision to use medical insurance reimbursement plans (MERPs) or not in your business requires a lot of consideration. It is important to understand if this will save you money in the long run and if you will be able to deduct the expenses on your taxes in the next year.

 

What Is a MERP?

 

A medical expense reimbursement plan helps reduce your employees’ costs when it comes to paying for doctor’s visits, prescription medications, hospital stays, and various types of treatment. MERP deductions happen because you as an employer contributes to these costs directly. In turn, you are able to take the money off of your tax expense when it comes time to pay income taxes for your business itself.

 

While this sounds very attractive because you get to pay less taxes overall, you still need to meet all the qualifications necessary to use one of these programs. Consider getting help from a ClaimLinx consultant to help navigate the process of signing up and using one yourself.

 

MERP Tax Information

 

There are multiple ways to get tax deductions when it comes to medical care and health insurance plans as an employer. Small businesses with less than 50 employees get specific rules that apply to them. In general, any company that pays for at least half of employee premium costs can use that total amount to get deductions to help them minimize their tax responsibilities.

 

When MERPs are involved, rules about specific plans in writing and contractual agreements apply, but these would exist anyway to make sure all workers understood their health coverage. When the terms of this reimbursement plan are met, employers can use the amount they pay as tax deductions. 

 

To answer the initial question, you know you can enjoy a MERP deduction when you avail yourself of this amazing opportunity to save money in your business. As long as you qualify for the specific plans and pay according to the contractual agreement, you can save on taxes every year.

 

The decision about what type of plan to offer and the specific coverage options for the people who work for your company includes some degree of complexity. You want to get as many tax deductions as possible to minimize costs and payment requirements.

 

One way to simplify your options and the administration of the MERP is to use a third-party administrator like one from ClaimLinx. Besides getting full employer health benefits consulting services to make the right choice in the beginning, you can also enjoy the convenience and affordability of having an outside consultant manage the plan itself.

 

You have enough responsibilities of operating your business smoothly and ensuring future profits. Let the health coverage and medical insurance reimbursement plan experts handle both the employee and business side going forward. We provide education for the workers so they fully understand their responsibilities and savings, access to local customer service, full employer reports and claims assistance, and so much more.

 

 

MERP ClaimLinx

ClaimLinx Glossary: Medical Expense Reimbursement Plan (MERP)

A medical expense reimbursement plan (MERP) is part of the ClaimLinx Solution. A MERP allows business owners to make a tax-deductible contribution to employees’ medical expenses. Our employer benefits consultants combine a high-deductible health insurance plan from a national carrier with a MERP. This arrangement gives both workers and owners an optimal choice for health insurance benefits. Today’s ClaimLinx blog defines and explains how a MERP works with regards to health benefits.  

Short Definition of a MERP

A MERP lets business owners deduct any portion of medical expenses paid by the company or employees for their medical care. The idea is to reduce the out-of-pocket expenses that employees pay for medical care before health insurance starts to cover the costs. Contributions to these costs lower the amount of money the IRS calculates for a business’s income taxes. ClaimLinx helps you find the optimal funding levels for MERPs to give you the best way to provide health insurance for workers.

Related Post: Why did my employer purchase a MERP?

Example of How a MERP Works

Suppose ClaimLinx has determined a plan with a $3,500 deductible works best for your company. That means the employee would normally pay $3,500 before the health insurance coverage starts paying for his or her medical care. A MERP can help lower someone’s up-front costs for medical care. ClaimLinx designs a custom schedule of benefits for you and your employees based on medical needs and company budget. In this case, the employee would actually have a much lower deductible and may even experience copays for regular visits and procedures. Business owners receive the tax deduction only when an employee has a qualified medical expense when they pay part or all of the medical expenses.  

Why Employers Need a MERP

All the time, employers tell ClaimLinx they would not be able to have viable health insurance benefits without a MERP. Small businesses often have slimmer margins and can’t afford good benefits when premium costs go up. MERPs allow employers to keep offering great benefits on a smaller budget. When you take the administration of first-dollar benefits like copays for office and specialist visits away from the insurance company, you don’t have to pay as much for those benefits. The flexibility of MERPs let companies fund their employees’ medical expenses based on the budget and needs. And as a bonus, MERP funds transfer from year to year. So a company can build up funds over time. 

Related Post: HSA vs. HRA vs. MERP

The benefit to the company is also that MERPs lower the income that goes towards a tax liability. For example, a business owner has $500,000 in income in one year. The owner has $10,000 of qualified expenses he reimbursed for employees through the funding program. The owner does not pay income taxes on the $10,000 he contributed to that fund. At a 23.6 percent tax rate, the business owner pays $2,360 less in taxes for that $10,000.

ClaimLinx Navigates MERPs for You

The employee benefits consultants at ClaimLinx help business owners select the correct funding levels for MERPs, so employees save money on health insurance costs. Not only do owners lower their costs, but they also help retain employees with lower-cost employer-paid benefits. Contact ClaimLinx or call toll-free 1-800-858-1772 for more details on our ClaimLinx Solution.

ClaimLinx Health Insurance Strategy

ClaimLinx Offers a Full-Service Insurance Strategy

ClaimLinx offers more than just a way to provide health insurance to your employees. We offer a holistic solution to give great benefits to employees while saving money for business owners. Our ClaimLinx Solution blends a high-deductible insurance plan with a company-funded medical expense reimbursement plan (MERP). The result is an optimized health insurance plan for everyone at your business. ClaimLinx explains how we make this full-service insurance strategy work in today’s blog.

High-Deductible Health Plan

A high-deductible health plan allows for lower monthly premiums. Lower premiums mean you pay less money to have the health insurance plan in place. Normally, higher deductibles mean employees must pay more money before insurance coverage begins to pay for medical expenses. But ClaimLinx has a different strategy.

In 2019, the IRS defined a high-deductible plan as one with at least $1,350 for an individual or $2,700 for a family. These minimums mean individuals must pay the first $1,350 of medical expenses before the health insurance plan starts to cover certain costs. But ClaimLinx typically chooses plans with deductibles much even higher to really slash expenses on premiums. This is a part of our full-service insurance strategy.

Related Post: What is an employer-sponsored, or self-funded, plan?

MERP

Employers can use a MERP to help fund an employee’s costs before reaching his or her deductible. When paired with a high-deductible plan, MERPs offer a health insurance strategy that is cost-effective for employees and employers. 

For example, John Smith goes to the emergency room for a minor injury and receives a bill for $2,500. His insurance carrier sends him an Explanation of Benefits (EOB) that says he owes the full amount because he has not yet met his high deductible of $3,500. John’s employer, Acme Brick, has a MERP that covers emergency room visits with a $350 copay. That means John only pays $350 instead of $2,500. 

The ClaimLinx Solution is a win for everyone. John Smith experiences lower costs for medical expenses. Also, John’s employer is happy because he can afford to offer such great benefits since the cost of the company’s monthly premiums has gone down so much. Our full-service insurance strategy identifies the optimal combination of high deductible plan and MERP.

Related Post: What Is a MERP?

How This Strategy Saves Money

A high-deductible health plan lowers the monthly premiums for each employer. Instead of paying $1,000 per month for a family’s coverage, an employer might pay $700. A MERP continues the savings because it’s a tax deduction. Every time an employer reimburses an employee’s medical expenses, it lowers the amount of money the IRS figures into business taxes. Business owners not only pay lower income taxes, but they also lower onboarding costs by retaining employees for longer periods of time. Employees who remain healthier are more productive and miss less work. ClaimLinx shows you how we deliver for both business owners and employees with our full-service insurance strategy.

The ClaimLinx Solution: A Full-Service Insurance Strategy

ClaimLinx is here to find the best possible solution for health insurance at your business. We educate business owners and employees on the best practices for combining health insurance plans with a MERP. Our team provides third-party administration, employer benefits consulting, and complimentary elite services to our clients. Contact ClaimLinx or call toll-free 1-800-858-1772 for more details about our full-service insurance strategy.

Why did my employer purchase a MERP?

Your employer purchased a medical expense reimbursement plan (MERP) because he or she is looking out for your best interests by examining ways to cut costs while still providing you with the same health insurance benefits. Some employers have told us they would not have been able to provide health insurance benefits or would have been forced to severely cut benefits without purchasing a MERP.

Related Post: What is a Medical Expense Reimbursement Plan (MERP)?

What is a MERP?

A medical expense reimbursement plan (MERP) utilizes Section 105 of the tax code, a provision that has been included for more than 50 years. A MERP allows business owners to deduct any portion of a medical expense for its employees. It includes any business with one or more employees, so any sole proprietor is able to take advantage of this code. ClaimLinx can help you find the best way to use a MERP to save money.

Related Post: HSA vs HRA vs MERP