Employment Health Insurance Legality:?

Question

Hi everyone. I just need some advice about a legal situation. Please only answer if you are sure.

I know someone who is listed as an employee of a company that a family member owns. He/she does not actually render any services, but pays taxes on the income, and reports all wages to the federal government. He/she gives all money earned to his/her boss, who owns the business by himself.

The reason for this "employment" is medical insurance. The person involved would not have otherwise been able to afford prescription medications and surgery. So the family member offered to put him/her on payroll so that he/she would be covered under a cheaper health insurance policy.

Is this situation legal? Is his/her boss allowed to put him/her on the payroll without him/her rendering services? If word of this situation were to get out, who would get introuble -- the employee or the employer, or both? Is it fraud, or just a loophole in the system?

To me it seems like a loophole.

Answer 1

If the person is truly not performing any service at all for the company then it is illegal to call them an employee.  However, anyone can be designated as a "consultant," and plenty of family-run businesses operate just this way.

Answer 2

My question to you is, why do you care? This person has medical insurance and pays for it, he/she isn't getting it for free. Now if that was the case, that would and should be a problem. But the family member that owns the company is paying, most likey a lot, for their spouse's insurance. Are you worried about fraud against an insurance company? They are hardly angels and I will never feel sorry for them. For those of you who argue that this is fraud and he/she shouldn't be able to be on the plan, what is the alternative? Ah yes, put him on medicaid so that the rest of us have to pay for him. They way I see it, he and his wife are paying for it so I see nothing wrong with that. It's time we the people banded together against insurance companies instead of each other when it is so difficult to get a policy.

Answer 3

65% water is absolutely correct. It would be extremely difficult to prove the "employee" isn't functioning is some sort of 'consulting' capacity. It is a loophole... If you could prove they aren't functioning in any capacity as an employee, active, disabled, consultant, etc... then, its fraud. I'll bet the IRS would be MORE interested to know about this situation than the insurance company.

Answer 4

This would be constituted as fraud-since the only reason the employee is "paid" is for health insurance reasons.

The consequences of this situation, would it become known to the insurance company, could be termination of the policy if the insurance company could prove fraud. Given that the employer could prove that some type of work had been done by the relative, it would be difficult to prove.