Health Insurance Premium Reimbursements Taxability

[Boombaby99]

Are health insurance premiums that are taken out of your paycheck on a pre-tax basis and are later reimbursed considered taxable income? I ask because I am considering applying for Medicaid, but because I currently am covered under my husband's employer provided coverage, the state would want to enroll me in a HIPP program that reimburses the health insurance premium. This seems like it would be taxable to me since it's originally not taxed when it's taken out of his pay and it's earned income. 

[SabrinaD2]

Health insurance premiums taken out of your paycheck on a pre-tax basis aren't considered taxable income. However, if you receive reimbursement through the Health Insurance Premium Payment (HIPP) program, it may be taxable.

This is because the reimbursement is for an amount that wasn't initially taxed. The taxability depends on how the state classifies the reimbursement and whether it is paid directly to you or to the insurer

For specific guidance, it's best to consult a tax professional or refer to the IRS guidelines

[Boombaby99]

I don't see anything about Medicaid reimbursements on the IRS guidelines link you posted. It would be reimbursed to my husband, not the insurer. I understand that it may be taxable. That's why I'm asking this question on here lol But it looks like I would have to hire a tax attorney to even get a straight answer. 

[MonikaK1]

To be clear, are you planning to sign up for Medicaid with a share of the cost of premiums? Medicaid premiums vary by state and income, and may also include cost-sharing requirements. 

Reimbursement for premiums paid would not be taxable unless you already took a medical expense deduction on your tax return for the premiums.

If you have medical expenses that are reimbursed by a Health Reimbursement Arrangement (HRA), you can't include those expenses in your medical expenses.

See IRS Publication 502 for more information about the tax aspects of medical expenses.

[Boombaby99]

@MonikaK1 In my state of PA, if you have an employer sponsored health insurance plan and it's considered cost effective, you must enroll in that plan. Then the Department of Human Services reimburses you for the health insurance premiums that you pay for the employer sponsored insurance. The problem is that these premiums would be taken out pre-tax from my husband's paycheck and then are reimbursed by DHS. 

[MonikaK1]

If your spouse is simply being reimbursed for the amount that was deducted from their wages through a state assistance program for Medicaid recipients, then it would not be taxable.

According to this Pennsylvania DHS webpage, through HIPP (Health Insurance Premium Payment Program), the state purchases cost-effective, employer-sponsored health insurance for Medicaid recipients. Participating in HIPP gives Medicaid recipients more options when it comes to choosing a healthcare provider since some providers do not accept Medicaid payments but do accept private insurance. In addition, if a family is already paying for their benefits through their employers, enrolling in HIPP would mean that they get those benefits reimbursed to them.

If the employer's health insurance is determined to be cost effective, Medicaid recipients are required to participate in HIPP as a condition of continued eligibility for Medicaid. They will still be enrolled in Medicaid, but the employer insurance is used as the primary medical insurance.

The payments from DHS are therefore a reimbursement program to assist Medicaid recipients and are not taxable.

@Boombaby99