It’s common for employers to provide certain benefits for their employees, many of which are subject to strict rules under the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code, and other laws. Employee benefits can include:
- Paid holiday, vacation, and sick leave;
- Medical, dental, and vision insurance;
- Cafeteria plans;
- Disability insurance;
- Life insurance; and
- Retirement plans.
Benefits could also include less obvious things like severance pay packages, stock options, health and wellness programs, employer-paid day care centers, education assistance programs and scholarship funds, prepaid legal services, employee assistance programs, long-term care insurance, telecommuting, and adotion assistance.
The Affordable Care Act (ACA)
The benefits world as we know it changed in March 2010 when President Barack Obama signed comprehensive healthcare reform legislation, also known as the Affordable Care Act (ACA), into law. The ACA expands the federal government’s control over health insurance and health care and also places major new responsibilities on employers, healthcare providers, and others. The changes — and there are lots of them — are phased in, and many requirements are already in place.
Employers must remain in compliance with the provisions already in place and continue to strategically plan for and implement the provisions set to go into effect in the future. They must also be ready and watching for new healthcare insurance reform-related regulations and guidance.
By and large, federal benefits law began in 1974. That’s when Congress passed ERISA. ERISA’s main purpose is to protect employees from losing their pensions due to harsh vesting rules or poor management, but the law covers health benefits as well. ERISA protects both the employees who participate in your health plan and the family members they cover — spouses and children.
ERISA affects the following aspects of managing health benefits:
- It says what information you must give to employees, their dependents, and others.
- It requires you to have procedures for claims and for appeals of claim denials.
- It sets out duties for plan managers, called fiduciaries, who have authority and discretion to make decisions affecting the health plan. Fiduciaries must act prudently and only in the interest of health plan participants.
- It gives participants the right to sue for benefits and breaches of fiduciary duties.
ERISA generally applies to every employer that sponsors a group health plan for one or more employees. There are exceptions for the following:
- Plans sponsored by government bodies or churches;
- Plans maintained solely to comply with workers’ compensation, unemployment, or disability laws;
- Plans maintained outside the United States primarily to benefit nonresident aliens; and
- Health benefit programs in which employee participation is completely voluntary and in which you take only a limited role (for example, you simply collect premiums and send them to an insurance company).
The first major amendments to ERISA came with the Consolidated Omnibus Budget Reconciliation Act of 1986, or COBRA for short. COBRA was designed to protect employees and their families from losing health benefits if the employees lost their jobs. The law requires most companies to allow workers and their beneficiaries to keep their company-sponsored health coverage for a maximum of 18 months after events that qualify them for COBRA. These events, called qualifying events, include job loss, death, and divorce, for example.
Not all companies must provide COBRA coverage. Very small companies, generally those with fewer than 20 employees, need not comply. (Consult with your benefits attorney to be sure you correctly determine whether your company must comply with COBRA.) Small companies, however, may have responsibilities very similar to those of COBRA under state mini-COBRA laws. Check with employment or benefits counsel to determine whether your small business has mini-COBRA duties.
If your company is big enough to comply with COBRA, you’ll have to give employees notice of their COBRA rights when they join your company and when they leave.
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) was passed in part to address another area of employee concern about their health benefits — whether they could obtain coverage for health conditions they or their families had before they obtained benefits under a new health plan. HIPAA answered this question by restricting a group health plan’s ability to choose not to cover preexisting medical conditions and to discriminate against a person based on certain health-status factors.
Other HIPAA provisions aim to protect the privacy and security of your employees’ and their dependents’ health records. The privacy rules apply to both paper and electronic records, and the security rules apply only to electronic records. HIPAA’s medical-information privacy and security requirements generally apply to “covered entities,” namely, health plans, health care information clearinghouses, and health care providers. (Many HIPAA requirements also apply to a covered entity's "business associates.") Even though employers aren’t specifically considered covered entities, you may need to have procedures in place to protect the confidentiality of any protected health information (also known as PHI) that may come to your attention.
In October 2008, Congress passed the Mental Health Parity and Addiction Equity Act (MHPAEA). In general, the MHPAEA requires group health plans that offer mental health and/or substance use disorder benefits to ensure that those benefits are equivalent to the medical/surgical benefits offered by the same plan. This concept is referred to as “parity of benefits.” Some of the areas in which parity is required include financial requirements such as deductibles, copayments, and coinsurance percentages, treatment limitations such as annual number of office visits covered, and the level of coverage offered to treatment by out-of-network providers.
The Newborns and Mothers Health Protection Act of 1996 was passed to alleviate a trend toward shorter and shorter hospital stays for moms and newborn babies. At one time, mothers and infants were in and out of the hospital so quickly that some called the births “drive-through deliveries.”
NMHPA doesn’t require you to cover hospital stays for childbirth. If you choose to do so, however, you must comply with NMHPA or with any similar state statute offering greater protection. NMHPA generally requires health plans to give mothers and infants at least 48 hours in the hospital after a normal vaginal delivery or 96 hours after delivery by cesarean section.
There are exceptions, however. If an attending doctor or nurse midwife, after speaking with the mother, decides that either she or the baby or both can be sent home early, the group health plan and health insurance issuers don’t have to keep covering hospitalization for whoever is ready to go home. The attending healthcare provider must not have a financial or other incentive for early discharge.
The Women’s Health and Cancer Rights Act (WHCRA) was passed in 1998 to require group health plans that cover mastectomies to cover breast reconstruction, as well. WHCRA generally covers group health plans, as well as their insurance companies and HMOs. Certain governmental and church health plans may not be covered. If you provide coverage through an insured plan or HMO, the law of your state may apply if it was in effect on October 21, 1998, and if it requires at least the same coverage as WHCRA.
The Family and Medical Leave Act, passed in 1993 with significant amendments in 2008, gives eligible employees the right to take up to 12 workweeks of unpaid leave (and more for certain military-related reasons) during any 12-month period for certain specified reasons. During FMLA leaves, employees are entitled to continue health benefits, paying any premiums they would have paid if they were working.
The Uniformed Services Employment and Reemployment Rights Act (USERRA), passed in 1994, provides reemployment rights and other benefits for military veterans and employees who serve in the military. Among other things, it requires you to give your employees serving in the military the right to continue health coverage when they’re on active duty. USERRA coverage continuation rights are similar to COBRA rights, and they allow employees to extend coverage for up to 24 months. USERRA rules apply even if you aren’t covered by COBRA. If you are covered by both COBRA and USERRA, however, you generally must apply the rule providing the greater benefit for the affected employee.
Cafeteria Plans (Section 125 Plans)
These tax-advantaged accounts are called cafeteria plans because employees can pick and choose from a number of different benefits they can fund with pretax dollars. They’re also called Section 125 Plans (for the section of the federal tax code that applies to them). Whatever you call them, these accounts help employees stretch their earnings, since taxes aren’t taken out of whatever amounts they deduct from their paychecks.
Medicare Secondary Payer (MSP) Provisions of the Social Security Act
MSP provisions require that if a group health plan covers a Medicare eligible employee, the plan must provide primary coverage and can make Medicare only the secondary payer of benefits. For example, if both your health plan and Medicare cover a healthcare service, your plan must pay its full allowable charge for the service and Medicare will pay only if its allowable charge for the service is greater than the plan’s allowable charge (which is rare).
In addition, the MSP provisions say you as an employer may not encourage Medicare-eligible employees to drop coverage under your plan and take Medicare coverage as their primary coverage. Thus, for example, employers cannot provide Medicare supplemental coverage for current employees (although they may do so for retirees and other former employees entitled to coverage under the employer’s group health plan).
Other Laws and Regulations
Several federal laws prohibiting employment discrimination also prohibit discrimination in employee benefits, one of the most important terms and conditions of employment.
The Newest Discrimination Law — GINA
The Genetic Information Nondiscrimination Act (GINA) was enacted in 2008 and prohibits employers from obtaining genetic information from employees (with some exceptions) and from discriminating against employees based on genetic information. GINA defines genetic information as information about genetic tests, a disease, or a disorder of an individual or his family members. It applies to all employers covered by Title VII of the Civil Rights Act of 1964 (those with 15 or more employees) and is similar to many provisions of Title VII. It also amends ERISA and the Internal Revenue Code to prohibit genetic discrimination in group health coverage. And it amends HIPAA’s privacy provisions to include genetic information in protected health information or PHI.
In particular, group health plans may not adjust premiums or contribution amounts for groups covered under a plan based on genetic information. The insurance issuer may still increase contributions based on manifestations of a disease or disorder in someone who is currently enrolled in the plan (for example, your cousin Vinny). However, the manifestation of disease in one individual (Vinny) can’t be used as genetic information about other group members (such as you and others in your family) to increase the employer’s premium.
The EEOC has issued regulations on the employment discrimination implications of GINA.
Other Discrimination Laws
The Age Discrimination in Employment Act (ADEA) forbids employers (generally those with at least 20 employees) to discriminate against persons age 40 or over on the basis of their age. The law specifically prohibits denial of benefits to older employees.
The Americans with Disabilities Act (ADA) bars employment discrimination against those with disabilities. It applies to employers with at least 15 employees for each working day in at least 20 calendar weeks in the current or previous calendar year.
Title VII of the Civil Rights Act prohibits employment discrimination on the basis of race, national origin, sex, or religion. Title VII applies to employers with 15 or more employees, including state and local governments.
The Equal Pay Act prohibits discrimination based on sex in providing benefits as well as in the payment of wages, when men and women perform similar work for the same employer under similar working conditions.
The Pregnancy Discrimination Act (PDA) amended Title VII to provide that discrimination on the basis of pregnancy, childbirth, or related conditions is a form of sex discrimination. Employer-provided health insurance must cover costs for pregnancy-related conditions on the same basis as costs for other conditions, and the benefits cannot be limited to married couples.
Same-Sex Marriages and Civil Unions
This area of the law continues to rapidly develop in our nation’s courts and legislatures, and a number of states and cities have legalized same-sex marriages and/or civil unions. Some companies, moreover, have chosen to offer benefits to their employees’ same-sex partners, while others cover both same-sex and different-sex but unmarried unions.
Additionally, following the U.S. Supreme Court's ruling that Section 3 of the Defense of Marriage Act (DOMA) is unconstitutional, generally, federal laws that apply to spouses and married couples now apply equally to same-sex and opposite-sex couples who are legally married under state law.
State Laws on Benefits
States have continued to weigh in on employment and benefits issues. There’s been a steady trend for states to require that employers or insurance companies cover certain medical conditions, with coverage mandates increasing over the years. States also have a history of regulating workers’ compensation insurance, a parallel health insurance system for work-related injuries and illnesses. Moreover, states have historically regulated businesses within their borders in a number of ways, from licensure to taxation.Read More...