Health Care Plans
I am considering offering my employees a group health care plan. What options do I have?
There are three typical types of plans that are offered by employers. These are:
- Indemnity Plans. This type of plan allows an employee to pick her own doctors without restriction. These plans, like the others below, often have deductibles and copays. Depending on the level of coverage, this type of plan is usually the most costly.
- Preferred Provider Organizations (PPOs). This type of plan offers a network of hospitals and doctors to provide coverage to employees at an established rate.
- Health Maintenance Organizations (HMOs). This is the most limited of the options. Normally, an employee has a primary care physician that serves as a gatekeeper. Employees are not allowed to seek services outside the network.
What happens to my health care insurance if I change jobs?
In the past, it is likely that you were left without insurance. However, in 1996, the federal government passed the Health Insurance Portability and Accountability Act (HIPAA). The intent of this law is to make sure you do not lose benefits while you may be in transition or between jobs.
HIPAA also provides that group health care insurance at your new job:
- limits the exclusions for preexisting conditions;
- prohibits you and your dependents from being discriminated against based on their health status; and
- allows a special opportunity to enroll in a new plan to individuals in certain circumstances.
Further, HIPAA may also give you a right to purchase individual coverage if you have no group health care insurance available and have exhausted COBRA or other continuation coverage.
What preexisting conditions may be excluded from coverage under my new employer's health care plan?
A preexisting condition is a condition or illness that you had prior to coming to a new employer.
The only preexisting conditions that may be excluded under HIPAA are those for which medical advice, diagnosis, care or treatment was recommended or received within the 6-month period before your first day of coverage in the new plan.
I am changing jobs and am 6 months pregnant. Do I qualify for health care insurance with my new employer?
Under HIPAA, pregnancy may not be considered a preexisting condition. Therefore, you cannot be denied maternity coverage if the new plan provides for these benefits.
How do I prove that I had health care coverage with my old employer?
Your former employer's group health plan or insurance company is required to provide you with a statement certifying that you had coverage. You should have received it automatically when you received your COBRA paperwork. Under the law, you have up to 2 years from the time your coverage ended to request a certificate of credibility coverage.
Why would I need such a certificate?
HIPAA deals with health care portability. In essence, this means the ability to move your coverage from one employer to the other. Under the rules, you get credit for your previous coverage that occurred without a break of 63 days or more. This 63-day break can be extended if you elected COBRA.
I have just been diagnosed with a chronic heart condition. Can I lose my coverage or be charged more under my employer's health care plan?
Your company's health insurer or health plan provider may not establish rules for eligibility, or continuation of coverage for any person in the plan based on health status related factors. These include:
- health status
- physical or mental medical condition
- claims experience
- receipt of health care
- medical history
- genetic information
- evidence of insurability
- disability
Plans are expected to charge the same premiums for those similarly situated.
Then why do smokers have to pay more than nonsmokers for coverage?
Though it appears to be in violation to do so, HIPAA provides an exception to the above in the case of a bona fide wellness program. To qualify:
- the total reward that may be given is limited (no more than 10 to 20 percent of the cost to the employee);
- the program must be designed to foster good health or prevent disease;
- the reward must be made available to all similarly situated individuals and must allow any individual who cannot reasonably meet the wellness standard be given an opportunity to satisfy a reasonably alternative standard; and
- all plan materials explaining the terms of the program disclose the availability of a reasonable alternative standard.
I was hired after "open enrollment." Do I have to pass a physical to enroll in my employer's health care plan?
No. You do not have to take a physical in order to be eligible for coverage.
TIP: More information is provided regarding other HIPAA issues at the U.S. Department of Labor's Web sites. The addresses are: www.dol.gov/ebsa/faqs/faq_hipaa_ND.html and www.dol.gov/ebsa/faqs/faq_consumer_hipaa.html.
Employee Retirement Income Security Act (Erisa)
ERISA is a law established to set uniform minimum standards to ensure that employee benefit plans are set up and maintained in a fair and financially prudent manner. Employee benefit plans include pension and welfare benefit plans. The rules require that the persons or entities that manage and control the funds do the following:
- Manage the plans for the exclusive benefit of the participants and beneficiaries;
- Carry out their duties in a prudent manner and refrain from conflict-of-interest transactions;
- Comply with limitations on certain plans' investments in employer securities and properties;
- Fund benefits in accordance with the law and plan rules;
- Report and disclose information on the operations and financial condition of plans to the government and participants; and
- Provide documents required in the conduct of investigations to assure compliance with the law.
Sound daunting? These rules essentially say that the plans: (1) have to be for the benefit of the employees, (2) must follow the law, (3) have to tell the employees what they have in the plans, and (4) must act in a nondiscriminatory manner.
Why should I offer a retirement plan to my employees?
Offering retirement benefits is critical to stay competitive in the labor market. These plans help build loyalty and create an incentive for an employee to stay with an organization. Many of us will spend as much as a quarter of our lives in retirement. It is essential that employees start making plans early in their careers.
What types of plans typically fall under ERISA regulation?
In general, there are two types of plans:
Defined Benefit Plans. This type of plan sets a fixed preestablished benefit for the employees. It is typically tied to employee's earnings, length of service or both. It is the company's responsibility to ensure that the plan is adequately funded so that the money is there when the employee retires. Because of the costs, these types of plans are used less frequently than they had been in the past.
Defined Contribution Plans. There are a number of different plans that fall within this group. They include:
- 401(k)s. These plans allow an employee to put a percentage of pretax income into a retirement savings account. No tax is paid until the money is withdrawn. The maximum an employee can put into this account for 2005 is $14,000, rising to $15,000 in 2006.
- Profit Sharing. These plans allow the flexibility of making contributions based on the existence of profits. Under these plans an employer may make a contribution to the employee up to 15 percent of salary, but no more than $30,000.
- Money Purchase Plans. Here, the company commits to making annual contributions equal to a certain percentage of the employees salary up to 25 percent of earned income. Like the profit-sharing plan, the maximum contribution is $30,000. The rules for these plans require that all employees must receive the same percentage of salary. The plan also is paid even in years when there are no profits.
- Simplified Employee Pension (SEP). This is the only defined contribution plan that requires no filings, IRS approvals and no annual reporting. SEPs work like IRAs; however, rather than a $2,000 limit, you can defer up to $30,000 or 15 percent of annual earnings, whichever is less.