There are many advantages to switching from a traditional medical insurance program to a high-deductible health plan combined with a MERP.

Tax Advantages
A MERP offers tax advantages to both the employer and the employee. For the employer, the medical reimbursements are tax deductible. This transfers dollars for the employees’ benefit without incurring FICA, workers compensation, unemployment, or other employer-related payroll taxes. For the employee, a MERP plan’s reimbursement payments are not considered to be taxable.

Reduced Insurance Costs
Employers can reduce costs in two ways by implementing a MERP. First, by purchasing a high-deductible health plan, employers reduce their overall health insurance premiums. In addition, because the employer only pays un­insured expenses if and when they occur, the employer is able to save 25 - 45 percent within a one to two year period. This is because statistically, less than 20 percent of employees use their deductible and co-insurance. This means 80 percent do not reach their full deductible or co-insurance, and nationwide, 60 percent of employees have under $600 in medical claims annually. Therefore, the likelihood of the employer paying more for unreimbursed expenses than they would for lower deductible health insurance is extremely slim.

Reduced Up-Front Expenses
A MERP plan allows employers to contribute to employee health care expenses only when expenses are incurred. Employers do not pre-fund accounts for employees. Therefore, the employer keeps the funds if they are not used. This allows the employer to keep money in their business until needed.

Flexible Plan Design
MERP plans are extremely flexible and can be customized to suit the employer’s exact situation. The employer can establish maximum amounts for reimbursement, choose whether or not to offer drug cards or utilize co-pays, set eligibility requirements for participation, and reimburse only benefits they choose to fund.

Businesses of All Sizes are Eligible
Because there is no minimum size employer requirement for a MERP, businesses of all sizes are eligible. This makes a MERP especially attractive to employers that have had difficulties with renewal because of the size of their group.

A reimbursement program is perfect for any employer who wants to exercise more control over insurance premium costs and to provide sensible coverage for valued employees.

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