Health Plan Rules – Treating Employees Differently

Some employers may want to be selective and treat employees differently for purposes of group health plan benefits. For example, employers may consider implementing the following plan designs:

  • A health plan “carve-out” that insures only select groups of employees (for example, a management carve-out);
  • Different levels of benefits for groups of employees; or
  • Employer contribution rates vary based on employee group.

Types of plan designs may be discriminatory are plans where

  • only a select group of employees is eligible to participate;
  • there are different benefits available to a select group of employees; or
  • an employer contributes more of the cost of coverage for a select group of employees.

In general, employers may treat employees differently, as long as they are not violating federal rules that prohibit discrimination in favor of highly compensated employees. These rules currently apply to self-insured health plans and arrangements that allow employees to pay their premiums on a pre-tax basis. The nondiscrimination requirements for fully insured health plans have been delayed indefinitely.

Employers should also confirm that any health plan rules do not violate other federal laws that prohibit discrimination. In addition, employers with insured plans should confirm that carve-out designs comply with any minimum participation rules imposed by the carrier.

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The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.