Employer attempting to reimburse copays to meet contractual obligations;

Hello,

I am a member of a union, and our contract includes specific language regarding copays for prescription drugs. My employer is a public entity, and was recently subject to an audit, and as a result made the decision to switch prescription drug coverage from a private provider to a state sponsored provider.

The new insurance does not have the same copays as the contract demands, and so to meet the requirements of the contract the employer is talking about offering reimbursement of copays for the difference. I do not think they’ve checked this with the insurance provider, as I think it would tend to violate the point of co-pays in limiting the cost of the plan to the insurance provider. I do not know that they will tell the insurance provider.

I have concerns. This seems like an end around, as we’ll be paying copays with post tax dollars, and depending on the amount of prescriptions some employees may be receiving very significant amounts of money in reimbursement. I think there will be tax implications for this, as it’s probably income, right? It’s your employer writing you a check, and you’re spending the money? How would the IRS understand that as tax exempt as part of an approved employer sponsored health plan?

The whole thing sounds shady to me, but I don’t know anything about health care. Is this a normal practice, or should I be contacting a union representative?

Thanks!