Executive Medical Benefits with ArmadaCare - Rachel Rutherford

The video provides an in-depth exploration of Executive Medical Benefits, specifically focusing on the supplemental medical reimbursement plan offered by ArmadaCare. The central premise, introduced through the concept of "fair versus equal," argues that modern talent retention requires employers to offer tailored, enhanced benefits to specific, high-value employee classes rather than providing identical benefits across the board. The discussion emphasizes that this strategy is not just about employee goodwill but is a critical business decision aimed at mitigating the enormous financial and operational costs associated with losing key talent.

ArmadaCare is positioned as a fully insured, compliant solution designed to sit atop existing primary medical plans. Its core function is to reimburse employees 100% for any out-of-pocket medical expenses that qualify under Section 213(d) of the tax code. This includes deductibles, co-pays, and a wide array of specialized services often excluded or poorly covered by standard plans, such as infertility treatments, out-of-network mental health services, executive physicals, and preventative full-body scans. The plan can be "carved out" for a select group of employees (minimum of three) defined by the employer based on criteria like title, tenure, or compensation, ensuring the benefit is directed where it provides the greatest strategic value.

A significant portion of the conversation details the financial and compliance advantages. For the employer, the premium is a deductible business expense, avoiding the payroll taxes associated with offering equivalent salary increases. For the employee, the reimbursements are non-taxable, maximizing the net value of the benefit. Crucially, the fully insured nature of the product ensures compliance with 105h and the Affordable Care Act (ACA), exempting it from the non-discrimination rules that restrict self-funded HRAs. The speakers also highlight the shift in the labor market post-COVID, noting that while employees previously held significant leverage, employers are now strategically using enhanced benefits to retain the most dedicated and essential personnel, recognizing that the cost of retention is far less than the cost of replacement.

Key Takeaways:

• Strategic Talent Retention Tool: Executive medical benefits are a powerful tool for attracting and retaining top talent, particularly in competitive industries like life sciences. The cost of replacing a key executive or high-value specialist is often hundreds of thousands of dollars, making the investment in enhanced benefits a strong financial ROI decision.
• Compliance via Fully Insured Status: The fully insured structure of the supplemental plan is essential for compliance. It allows for executive carve-outs without violating the non-discrimination rules of the ACA or 105h, which self-funded plans must adhere to.
• Tax Efficiency: Employers benefit from tax deductibility of the premium without incurring payroll taxes, a significant saving compared to offering equivalent taxable salary increases. Employees receive all reimbursements tax-free, maximizing the benefit's actual value.
• Addressing High-Cost Medical Needs: The plan covers critical, high-cost services often neglected by standard primary plans, including comprehensive infertility treatments, extensive mental health support (even out-of-network), and advanced preventative care like executive physicals and full-body diagnostic scans.
• Incentivizing Longevity: Employers can structure the benefit tiers (e.g., Platinum, Diamond, Diamond Plus) based on employee tenure, creating a vesting schedule that encourages long-term commitment and loyalty to the organization.
• The "Fairness" Principle: Effective benefits strategy involves moving beyond equal benefits for all and implementing "fair" benefits tailored to the specific needs, risks, and contributions of different employee classes (e.g., C-Suite travelers, high-stress clinical staff).
• Anonymity of Use: Because the plan is fully insured, the employer does not see the specific claims submitted by the employee. This anonymity is vital for encouraging the use of the benefit for sensitive issues like mental health or family planning without fear of employer scrutiny.
• Concierge Service: The product includes a "white glove" service level, simplifying the reimbursement process via a mobile app, which enhances the perceived value and luxury of the benefit for time-constrained executives.
• Market Education Opportunity: Many employers mistakenly believe that executive medical benefits disappeared after the ACA. Consultants should proactively educate clients on compliant, modern solutions as a door-opener to C-Suite decision-makers (CFOs and HR leaders).

Key Concepts:

• Supplemental Medical Reimbursement Plan: An insurance product that reimburses employees for out-of-pocket medical expenses (deductibles, co-pays, etc.) up to a defined maximum, sitting on top of a primary health plan.
• 213d Eligible Expense: Expenses defined by the IRS tax code (Section 213(d)) that qualify as medical deductions, which form the basis for what the supplemental plan will cover.
• Carve-Out by Class: The ability to restrict an enhanced benefit to a specific, predefined group of employees (e.g., based on title or tenure) without violating compliance rules, provided the class definition is non-discriminatory.

Examples/Case Studies:

• Life-Saving Prevention: An executive’s wife utilized the benefit for an executive physical and preventative screening, which detected early-stage breast cancer, highlighting the life-saving potential of covering advanced diagnostics.
• Addressing Nursing Attrition: A company experiencing high turnover among its Directors of Nursing used the benefit to stabilize the workforce, demonstrating its utility in retaining specialized, high-demand operational roles beyond just the C-Suite.
• Infertility Treatment Coverage: The plan covers the full cost of expensive procedures like IUI and hormone therapy, addressing a significant financial burden for employees that standard insurance often leaves uncovered.