To secure talented employees, employers must offer a competitive compensation package that may include health insurance. Indeed, health care may be the most valued of employee benefits because purchasing insurance on the individual market has traditionally been cost prohibitive. For employers, providing health coverage can benefit the company as well. Cultivating a healthy workforce may reduce absences due to illness, avail the company to lower group rates, and open the company to certain tax breaks.
Several laws regulate how employers may provide medical benefits. The primary federal law that applies to employers offering private sector health plans is the Employee Retirement Income Security Act (ERISA). ERISA also covers retirement, life, disability and apprenticeship plans. The Employee Benefits Security Administration enforces and administers certain provisions of ERISA. Detailed sections of the law deal with government reporting, define disclosures owed to participants, and ensure that plan funds are protected so that qualified participants can receive benefits.
Group health plans covered by ERISA are employee welfare benefit plans that provide medical benefits coverage for those who participate, their spouses, and their dependents. This includes coverage for prescription drugs, hospitalization, illness, vision, and dental care. Group health plans offer employees benefits by using funds in a plan trust, buying insurance from a group market issuer, or by “self-funding” from an employer’s assets.
Under ERISA, the plan manager owes a fiduciary duty to the plan participants and must meet specific standards of conduct. Fiduciary status is based on the functions a person or entity performs for the plan. Certain functions involving business decisions are not considered as fiduciary action. These include the decisions to amend a plan, terminate a plan, establish a plan or determine a benefit package. However, those who use discretion to implement decisions, acting on behalf of the plan, may be a fiduciary.
A plan’s structure determines who has fiduciary responsibilities under ERISA. Employers that partially or fully self-fund group health plans exercise discretionary authority and are considered fiduciaries to the participants. All plans covered by ERISA have at least one fiduciary that is named in the written plan, but there are often multiple fiduciaries including plan administrators, trustees and investment managers.
ERISA has been amended numerous times. One change mandated that group health plans and health insurance issuers treat mental health benefits like other medical benefits. So, this mental health parity requirement forbade health plans from charging a higher co-pay or deductible for mental health benefits, or imposing more restrictive treatment limitations that affected the number or frequency of doctor visits than for other medical benefits.
Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) former employees and their families may elect to continue their group health plan coverage at group rates when coverage was lost on the basis of certain qualifying events (such as involuntary unemployment). COBRA only applies to employers that employed 20 or more employees in the previous year. However, if a group health plan is collectively bargained by multiple employers, only one of the contributing employers must have 20 or more employees for COBRA to apply to all of the employers under the group health plan.
Another ERISA amendment was the Health Insurance Portability and Accountability Act (HIPAA), which permits special enrollment when specific life or work events happen. HIPAA limits exclusions based on pre-existing conditions and prohibited discrimination.
The Patient Protection and Affordable Care Act, commonly referred to as Obamacare, requires that by 2015, employers must offer affordable health insurance that meets a certain minimum levels of coverage if they have 50 or more full-time employees or a combination of employees whose hours are equivalent to 50 full-time employees. Employers who fail to provide the required coverage may be subject to an assessment under the Employer Shared Responsibility provisions, if one of its employees receives a premium tax credit for purchasing individual coverage on an Affordable Insurance Exchange. For small businesses with fewer than 25 employees, they may be eligible for a tax credit if they purchase health insurance for their employees.