Historically, employers that wanted their employees to be protected with health coverage, but didn’t want the hassle of having a company health plan, could simply give them an amount of money sufficient to reimburse them for the cost of buying that coverage or some portion of it. As long as the individuals provided evidence that they used those funds for that purpose, the dollars were excludable from taxable income for the employees.
Alternatively, employers could just pay the premiums directly to the insurance carrier.
Back in November 2014, however, the Department of Labor (DOL) declared that companies reimbursing employees for medical care instead of offering a health care plan is equivalent to a health plan and is subject to the Affordable Care Act (ACA). And since those reimbursement arrangements failed to meet ACA requirements in two ways — that is, the condition that group health plans have no annual limits on benefits, and also that no co-pay for certain preventive health services must be paid — they were ruled to be noncompliant with the law.