The topic for today’s Blog is:

Medical Expense Reimbursement Plans under Section (“MERP”) 105 c, H of the IRC code.  There is plenty of information on the internet about MERP’s.

I once had a client tell me: (Joking) that a search engine showed the website for the Middle Earth Reenactment Players (MERP) But we aren’t talking about Orc’s and Elves today!

The reason why a MERP(105 c,h) is a powerful tool for the business owner are twofold.

1st)  MERP allows the participants to be reimbursed as a tax-deductible expense on the company books.  The types of medical expenses that can be reimbursed are out of pocket costs for deductibles, co-pays, prescription drugs, dental, vision, chiropractic, and many therapies.  If a doctor prescribes something “…medical necessity,” you can deduct it.   No income to the employee or their dependent

So, for example, let’s assume a business owner is in the top tax bracket of 39.6{3baf18ff6e3f203d857ac6fecc289c45151e85bc99ebb466bbfbfb6bdc48323d}, and has out of pocket medical costs of $20,0000.   Because he would be reimbursed through the MERP, his tax savings would be $20,0000 x 39.6{3baf18ff6e3f203d857ac6fecc289c45151e85bc99ebb466bbfbfb6bdc48323d} = $7920.

2nd)  MERP used as a tool to co-insure the deductible on a group medical plan to lower premium costs.  What! The strategy is to choose a high deductible group health insurance plan, and use some of the premium savings from lower premiums to offset the deductible costs for employees.

So, for example, let’s assume a company has 100 employees, and received a monthly premium reduction of $150 per month per employee by increasing the deductible from $ 1,000 to $ 5,000.

100 Employees

Annual Savings per Employee $ 1,800

Total annual Savings $ 180,000  Who do you trust with your money, the insurance carrier or yourself?

What is your company’s 2014, 2015, 2016 deductible claims experience? How many employees/dependents actually use their deductible 7{3baf18ff6e3f203d857ac6fecc289c45151e85bc99ebb466bbfbfb6bdc48323d}, 5{3baf18ff6e3f203d857ac6fecc289c45151e85bc99ebb466bbfbfb6bdc48323d}?

Who knows at your company? Your broker, he/she has never mentioned usage of deductible. Same for your HR personnel, Never realized the value of deductible statistics……

An Actuary calculates how much of the annual savings to set aside in the MERP trust so that you have cash in hand to reimburse an employee for the difference between the old deductible of $ 2,000 and the new deductible of

$ 5,000.  This is your “co-insurance”

Many Health Insurance brokers don’t offer a MERP because they are not set up to offer it.  We have a few who can work with us to help you set up this plan.

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