IRS Memo on Tax Treatment of Fixed Indemnity Health Plans

John GarnerCompliance, Resources

The Internal Revenue Service (IRS) has released a memorandum clarifying the tax treatment of benefits paid by Fixed-Indemnity Health Plans. A fixed-indemnity health plan typically pays a set dollar amount for certain health-related occurrences such as emergency room visits and inpatient hospital stays. Generally, these plans pay without regard to the amount of medical expenses incurred by the employee. Here are a few examples of a fixed-indemnity health plan included in the IRS memo:

Situations 1, 2 & 3 in Tax Memo 20170313:  A fixed indemnity health plan that pays employees $100 for each medical office visit, and $200 for each day in the hospital, without regard to the amount of medical expenses actually incurred by the employee or the amount that is paid or reimbursed by other insurance.

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