MERP

Advantages of Having a Self-Funded MERP

by ClaimLinxSeptember 10, 2020October 19, 20201 Comment

As a result of millions of people all around the world losing their jobs and subsequently their insurance due to the current public health crisis caused by COVID-19, which is also the case in the US, an alternative of health insurance that has come to the forefront is what is known as Medical Expense Reimbursement Plans or more easily referred to as MERP.

Predominantly, MERP has become very popular amongst employers lately. This is mainly because with MERP, organizations have the leeway to provide tax-free money, as opposed to providing conventional benefits such as group insurance. This entails the employees of the organization having the discretion to buy whatever product or service pertaining to health care as they prefer, which may also include health insurance for themselves. The employer, then, is responsible to reimburse their employees up to the allowance they have been given.

To help you grasp the concept of what MERP exactly is, how they work, and what are the advantages associated with them, this article contains a breakdown of all the necessary details.

Shall we begin?

What exactly is a MERP?

To start off, the term MERP stands for Medical Expense Reimbursement Plan. This is any sort of insurance plan that requires businesses and employers to reimburse their employees for the medical expenses that they or a dependant of their paid for out of their own pocket. When executed properly, a MERP will allow employees to be reimbursed for the entire medical expense, entirely free of any taxes.

How do MERPs Work?

A MERP is any plan that allows businesses to give their employees without any taxes applied to the amount. The money that is given by the employer can only be used to pay off any medical expenses that an employee paid for out of their own pockets. The process of a MERP typically involves five main steps:

Step 1: Your employer will determine the allowance amounts- this means the set amount of monthly allowance that is allowed for each employee; should the medical expenses of an employee exceed the allowance limit, the employer will only be liable to reimburse the employee for the allowance that was predetermined.

Step 2: As the employee, you will have to purchase your own health insurance plan- meaning you will have the discretion to choose whatever health care products best serve your needs and requirements. This purchase, however, will be paid for from your own pocket for the time being.

Step 3: You will be required to provide proof of purchase- once you have made the purchase for your preferred health care products, you will be asked to provide documentation recording that a medical expense was incurrent. This document could be anything from a receipt to an explanation of benefits. However, regardless of the type of document, there should be three key pieces of information present in the document, including the date of the purchase, a description of the health care product or service that was purchased, and your name.

Step 4: Once the document has been submitted, it will be put under review by your employer- this is done so that the employers can make sure that the amount of allowance is not exceeded, the type of product or service purchase qualifies to be reimbursed for under MERP and that all the important information is present. If the documentation is missing anything, you may be asked to submit additional records.

Step 5: You will be reimbursed by your Employer- after reviewing to make sure all information is present and valid and everything else is in, your employer will pay you up to the amount that was required by your predetermined allowance.

What are the various types of MERPs?

Before this point in the article, we have discussed a MERP as an umbrella term for any plan under section 105 that dictates that the employer reimburse their employees for the medical expenses paid for out of their own pockets. In this following section, we will take a deeper dive into MERP and take a look at the various types of MERPs that exist out there.

The following are a few of the most commonly used variations of MERPs:

Stand-alone MERP

A stand-alone MERP, otherwise also known as a stand-alone HRA, refers to any plan that is provided for by the employer where they reimburse employees for health insurance policies that have been purchase for their individual selves. These are MERPs that only cover personal medical expenses as opposed to group health insurance. This way, employers can offer their employees amazing benefits without having to raise their own costs and dealing with the intricacies of insurance.

A MERP that covers group health insurance

This type of MERP that is coupled with a group plan is also referred to as group coverage HRAs, Deductible HRAs, or Group HRA. This is where employers bundle a MERP with group health plans that typically come with high deductibles. In this variation of MERP, the employer will increase the deductible to an even higher amount on the group health plan. Then, you as the employee will be paid in the difference between the deductible and your allowance. This provides an effective avenue for employers to insure a part of their group plan through dollars before the taxes on them are paid, which allows for huge savings without compromise on the coverage being provided.

MERPs that exclusively cover Vision and Dental expenses

Even in the case of MERPs, there are only certain types of medical expenses that qualify the employee to receive reimbursement. This type of MERP comes in handy if your employer wants to cover you for your vision and dental expenses without having to purchase expensive insurance plans.

The Advantages of Self-Funded MERPs

Employees get choice and flexibility

With MERPs, employees have the discretion to choose whatever health care products meet their needs the best so that the plans can be tailored to requirements and no coverage goes unused.

The company stands to gain financial benefits

Unlike in the case of fully-funded insurance plans where the employer will have to pay the entire premium, in MERPs, they are only required to pay for the expenses that were incurred without incurring any sunk costs.

Employees make better health care decisions

When employees are required to pay for their medical expenses out of their own pockets initially, and they are restricted to a set amount of allowance, they are better prone to learning how to make better and more informed decisions about their health and the health products they purchase.

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

by ClaimLinxMay 20, 2020August 18, 2020Leave a comment

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.

ClaimLinx Glossary: Medical Expense Reimbursement Plan (MERP)

by ClaimLinxOctober 25, 2019October 18, 20192 Comments

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.

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.

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 Offers a Full-Service Insurance Strategy

by ClaimLinxOctober 18, 2019Leave a comment

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.

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.

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?

by ClaimLinxJanuary 1, 2017December 3, 2019Leave a comment

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.