New Bulletin to Bring Additional Clarity to AG Opinion on Health Insurance Reimbursement

By the Auditor of State’s Office

Wednesday, April 12, 2017

One of the more common findings in township financial audits relates to the improper reimbursement of out-of-pocket health care costs. 

It appears there is confusion over what is permissible, and a recent opinion by Ohio Attorney General Mike DeWine provides clarity on one issue related to health care reimbursements. In the coming weeks, township fiscal officers across Ohio will receive a bulletin from my office addressing the opinion.

In his opinion, the Ohio Attorney General addressed premium reimbursements made for the dependent of a township officer who had declined to accept insurance coverage provided under a township policy. This issue, raised by the Mahoning County prosecutor, is explained in depth in Attorney General’s opinion No. 2017-007 (which can be found on the Attorney General’s website).

Simply stated, Ohio law authorizes townships to reimburse officers and employees for health care premiums when:

  • the township doesn’t provide a health care plan;
  • an employee is rejected for coverage under that plan; or
  • an employee opts out of the township’s insurance plan. 

In cases in which the township offers insurance, reimbursement is limited to the average cost of provided to township officers and employees. 

Some township fiscal officers have run into trouble because they reimbursed an employee for a dependent’s insurance premium costs in addition to the township employee accepting single coverage from the township’s plan. 

Attorney General DeWine’s opinion makes clear that a township that offers insurance coverage cannot reimburse employees for out-of-pocket health care costs incurred by their dependents for separate coverage provided by another entity unless the officer or employee is turned down for or declines coverage offered by the township.  In view of the Attorney General’s opinion, and because there may be other townships which made improper reimbursements based on a misunderstanding of the law, my office will not issue findings for recovery for reimbursements made under these circumstances prior to April 15, 2017.

While not part of the Attorney General’s opinion, our auditors frequently find townships have made reimbursement for of out-of-pocket health care costs unrelated to insurance premiums. The Ohio Revised Code is clear that the reimbursement provisions apply only to out-of-pocket expenses related to premiums, and not to payments for medical expenses.

For example, a Clermont County township’s fiscal officer was improperly reimbursed eight times for a total of $14,325 in medical and hospital expenses, according to an audit released in September, 2016. Another audit, issued in October of last year, found that three public officials of a Lawrence County township were improperly reimbursed $6,188 for medical and hospital expenses.

In the past, my office and the Ohio Attorney General have advised township officials on the effects of the Affordable Care Act (AC) on insurance premium reimbursement. As we have indicated, under an interpretation of the ACA by federal officials, insurance premium reimbursement would subject employers to fines.  Congress, however, recently passed the 21st Century Cares Act which permits reimbursements for employers which employ fewer than 50 full-time or full-time equivalent employees, and do not offer health insurance coverage. Any such reimbursements must be uniformly provided to all eligible employees; must be paid for solely by the employer; must involve no salary reduction to the employees; and must be limited to annual payments $4,950.00 per employee for an individual plan or $10,000.00 for family coverage. The changes are effective for the calendar year 2017 and years that follow.       

This is a complicated issue, and, for that reason, the Attorney General’s opinion and our upcoming bulletin will be helpful to all township officials in understanding and complying with the law. I recommend townships seek legal advice when dealing with health care plans and reimbursements. If a township official needs assistance on this matter, my office is prepared to help. Contact our Legal Division by phone at 1-800-282-0370.

This article was first published in the Ohio Township Magazine.