Health Benefits And Your Wellness Program Work Hand In Hand

Learn More About A Medical Expense Reimbursement Plan - (MERP)

Your Medical Expense Reimbursement Plan or (MERP) is very similar in structure to an HRA, with the exception of the creation of the tax advantaged participant accounts. The purpose of a MERP is to reduce the cost to the employer and no employee savings accounts are created. Here is how a MERP generally works:

  • An employer purchases a high deductible health plan which replaces their existing coverage. Generally, the new premium will be 15-25% lower than the prior plan.
  • The employer decides the new employee deductible amount and how closely they desire to modify the benefits of the original plan of benefits.
  • The employer self funds the difference between the old plan benefits and the new deductible.
  • The high deductible plan may be fully insured or self funded.
  • To the extent that all participants do not spend the full difference, the employer generates a savings which they get to keep.
  • The average amount of savings spent by participants is 50%, yielding a 50% savings for the employer. Actual savings will vary by employer.
  • Eligible expenses may include all Section 123(d) expenses or may be limited to those eligible expenses defined by the employer in the Plan Document.
  • Medical expense reimbursement plans are governed by IRS Code Section 105 and are subject to discrimination testing.