What do employers need to consider regarding healthcare benefits? The enactment of the Affordable Care Act (ACA) marked the latest step in a continuing shift from virtually no federal regulation of employer-sponsored health insurance to extensive substantive and administrative requirements. This regulation initially included the reporting, disclosure, and claims procedure requirements enacted in the Employee Retirement Income Security Act (ERISA). Through the years, additional federal requirements were added, including portability and coverage guarantees, minimum maternity stays, mental health parity, required coverage of reconstructive surgery following a covered mastectomy, coverage of adoptees, and pediatric vaccine requirements. During the same period, there was a large increase in state insurance law benefit mandates.

Employers need to be aware of the many coverage and benefit requirements related to healthcare insurance. There are many laws involved in such requirements, including, but not limited to:

Congress also enacted special health coverage requirements in 2020 to address the health crisis posed by COVID-19 (see “COVID-19 Coverage,” below).

HIPAA applies to group health plans established or maintained by employers or employee organizations, or both.

HIPAA’s coverage-related provisions do not apply to every type of insurance that might be considered part of an employer’s “health benefits” package (29 USC 1191b). For example, HIPAA does not apply to:

There are also other specific benefits that, if they meet certain conditions, are exempt from HIPAA. For example, certain benefits are not subject to the requirements if they are offered:

Separate provisions of HIPAA cover privacy and security of health data. Please see the national Health Information Privacy (HIPAA) section.

End to preexisting condition exclusions. Group health plans, as well as health insurance issuers offering group or individual health insurance coverage, may not impose any preexisting condition exclusion with respect to such plan or coverage.

“Preexisting condition exclusion” defined. A preexisting condition exclusion is a limitation or exclusion of benefits (including a denial of coverage) based on the fact that the condition was present before the effective date of coverage (or if coverage is denied, the date of the denial) under a group health plan or group health insurance coverage (29 CFR 2590.701–2). It does not matter whether any medical advice, diagnosis, care, or treatment was recommended or received before that day. It includes exclusions applied as a result of health status information obtained before the individual's effective date of coverage or denial of coverage under a group health plan or group health insurance coverage, such as a condition identified as a result of a preenrollment questionnaire or physical examination given to the individual, or a review of medical records relating to the preenrollment period.

A plan exclusion that satisfies this definition is a preexisting condition exclusion even if it is called something else.

Since group health plans may not impose preexisting condition exclusions, HIPAA’s requirement to provide a certificate of creditable coverage has been superseded (29 CFR 2590.701-5).

Statutory provision. HIPAA makes it illegal for group health plans to have eligibility rules that discriminate based on the following health-related factors:

Evidence of insurability includes conditions arising out of acts of domestic violence and participation in activities such as motorcycling, snowmobiling, all-terrain vehicle riding, horseback riding, skiing, and other similar activities.

Definition of a “health factor.” The decision whether or when to elect health coverage (including when to enroll, such as under special enrollment or late enrollment) is not, itself, a health factor. However, a plan must treat special enrollees the same as similarly situated individuals (SSIs) who are enrolled when first eligible.

Eligibility rule prohibitions. A group health plan may not establish any rule for eligibility (or continued eligibility) to enroll for benefits that discriminates based on any health factor that relates to that individual or a dependent of that individual. Eligibility rules include rules relating to:

Benefit provisions. The nondiscrimination provisions do not require a group health plan to provide coverage for any particular benefit to any group of SSIs. However, benefits provided under a plan must be uniformly available to all SSIs, and any restriction on a benefit or benefits must apply uniformly to all SSIs and must not be directed at individual participants or beneficiaries based on any health factor. Thus, for example, a plan may limit or exclude benefits in relation to a specific disease or condition, limit or exclude benefits for certain types of treatments or drugs, or limit or exclude benefits based on a determination of whether the benefits are experimental or not medically necessary, but only if the benefit limitation or exclusion applies uniformly to all SSIs and is not directed at individual participants or beneficiaries based on any health factor of the participants or beneficiaries.

In addition, a plan may require the satisfaction of a deductible, copayment, coinsurance, or other cost-sharing requirement in order to obtain a benefit if the limit or cost-sharing requirement applies uniformly to all SSIs and is not directed at individual participants or beneficiaries based on any health factor of the participants or beneficiaries.

Note: The regulations provide that a plan amendment that applies to all individuals in one or more groups of SSIs and is made effective no earlier than the first day of the first plan year after the amendment is adopted is not considered to be directed at any individual participants or beneficiaries.

SSIs. The HIPAA nondiscrimination requirements apply only within a group of individuals who are treated as SSIs. Participants and beneficiaries may be treated as belonging to separate groups of SSIs. If individuals have a choice of two or more benefit packages, individuals choosing one benefit package may be treated as a group of SSIs distinct from individuals choosing another package.

Participants. Plans may treat participants as two or more distinct groups of SSIs if the distinction is based on a bona fide employment-based classification. Whether a classification is bona fide and employment-based depends on all the relevant facts and circumstances, including whether the employer uses the classification for purposes independent of qualification for health coverage (for example, determining eligibility for other employee benefits or determining other terms of employment). Examples of classifications of participants that may be bona fide include full-time versus part-time status, different geographic location, membership in a collective bargaining unit, date of hire, length of service, current employee versus former employee status, and different occupations. However, a classification based on any health factor is not a bona fide employment-based classification unless it results in favorable treatment of individuals with adverse health factors.

Beneficiaries. A plan may treat beneficiaries as two or more distinct groups of SSIs if the distinction is based on any of the following factors:

If the creation or modification of an employment or coverage classification is directed at individual participants or beneficiaries based on any health factor, the classification is not permitted unless it is permitted because it results in favorable treatment of individuals with adverse health factors. Thus, an employer may not modify an employment-based classification to single out, based on a health factor, individual participants and beneficiaries and deny them health coverage.

Nonconfinement, actively at work, and continuous service prohibitions. A plan may not establish a rule for eligibility or set any individual’s premium or contribution rate based on the following:

Exception for the first day of work. A plan may establish a rule for eligibility that requires an individual to begin work for the employer sponsoring the plan (or, in the case of a multiemployer plan, to begin a job in covered employment) before coverage becomes effective, provided that such a rule for eligibility applies regardless of the reason for the absence.

Source of injury prohibitions. If a group health plan generally provides benefits for a type of injury, the plan may not deny benefits otherwise provided for treatment of the injury if the injury results from an act of domestic violence or a medical condition (including both physical and mental health conditions). This rule applies in the case of an injury resulting from a medical condition even if the condition is not diagnosed before the injury. For example, a suicide exclusion may not apply to injuries resulting from a suicide attempt if the suicide attempt was the result of a medical condition such as depression, even if the depression diagnosis was not made until after the suicide attempt.

Although HIPAA generally prohibits a plan from discriminating against SSIs based on health status, the law also recognizes that the nondiscrimination provisions were not meant to prevent a group health plan or an issuer from establishing premium discounts or discounts on copayments or deductibles in return for adherence to programs of health promotion and disease prevention (29 CFR 2590.702(b) and 29 CFR 2590.702(f)). The wellness regulations provide guidance for evaluating the permissibility of wellness programs.

Generally, the following are permissible under HIPAA:

Generally, wellness programs that provide rewards for participation rather than based on outcome are permissible, including:

These programs are generally acceptable under HIPAA because they do not reward participants based on health status.

If the program provides a reward based on a health factor (the program is “health-contingent”), it must satisfy the HIPAA wellness program requirements. There are now two types of “health-contingent” wellness programs:

Examples of “activity-only” programs include walking and diet programs. The participant is not required to achieve any particular result but must participate in the activity to earn the reward (or avoid the penalty). Examples of “outcome-based” wellness programs include smoking and biometric screenings where the participant is required to succeed (e.g., quit smoking) or meet a certain requirement (e.g., lower cholesterol). Despite their differences, both activity-only and outcome-based programs are considered “health contingent.”

To be a permissible health-contingent wellness program, it must:

Available to all similarly situated individuals. A wellness program must be available to all similarly situated individuals in the plan. This means that the plan must provide reasonable alternative standards to individuals who cannot meet the required health factor-related standard because it is unreasonably difficult due to a medical condition to satisfy the standard. It must also provide reasonable alternative standards to individuals who cannot meet the required health factor-related standard because it is medically inadvisable to meet the standard. A plan may require that an individual provide verification from the individual’s physician—for example, that a health factor makes it unreasonably difficult or medically inadvisable for the individual to satisfy the standard.

Available at least once per year. The wellness program must give individuals eligible for the program the opportunity to qualify for the reward at least once per year.

Reasonably designed. The program must be reasonably designed to promote health or prevent disease. A program satisfies this standard if it has a reasonable chance of improving the health of or preventing disease in participating individuals. It must not be overly burdensome, must not be a subterfuge for discriminating based on a health factor, and must not impose a highly suspect method to promote health or prevent disease.

Reward percentage requirements. A wellness program reward cannot exceed 30 percent of the cost of employee-only coverage under the plan, unless it is a tobacco cessation program, in which case the reward cannot exceed 50 percent. (The previous limit was 20 percent.) If other dependents (e.g., children or spouses) may participate in the wellness program, the reward cannot exceed 30 percent of the cost of the coverage in which the dependents are enrolled. Cost includes both the employer and employee contributions for coverage.

This 30 percent limit includes all possible wellness rewards. For example, if your plan offers rewards for lowering cholesterol and exercising regularly, the rewards combined cannot exceed 30 percent of the cost of participant coverage under the plan.

Disclosing alternatives. A wellness program must describe the terms of the wellness program, including a statement that if it is unreasonably difficult due to a medical condition for an individual to achieve the health goal to receive the reward, a reasonable alternative standard will be made available to the participant. A program cannot just provide a reasonable alternative. It must also disclose that a reasonable alternative will be made available when the terms of the program are described.

EEOC requirements. Sponsors of wellness programs also should be aware of the U.S. Equal Employment Opportunity Commission (EEOC), which has been challenging such programs in court since 2014. The EEOC’s major argument is that any medical examinations or inquiries, because they are not job-related, will violate the Americans with Disabilities Act (ADA) unless the wellness program is “voluntary.” Please see the national Disabilities (ADA) section. The EEOC also has suggested that, in similar fashion, such examinations or inquiries of spouses and dependents will violate GINA because their health information is considered “genetic information” on the employee (see below).

In 2016, the EEOC issued final regulations detailing its position on both the ADA and GINA issues, including the conditions under which wellness programs would be deemed voluntary. The rules allowed employers to offer incentives up to a maximum of 30 percent of the cost of employee-only coverage to promote participation in a wellness program.

In 2019, however, a federal district court vacated the incentive portions of the rules, finding that the EEOC had not adequately justified its dollar limits for wellness incentives under the underlying statutory requirements that wellness programs be “voluntary.”

However, other portions of the rules remain in effect. The wellness program must be reasonably likely to promote health or prevent disease. Employers must provide employees with a notice explaining what medical information will be collected, with whom it will be shared, how it will be used, and how it will be kept confidential. Employees may not be required to participate in a wellness program, and those who refuse may not be disciplined, denied health coverage, or given reduced health benefits for doing so.

Also, while no ADA regulations are in effect regarding incentive amounts, the EEOC can continue challenging wellness programs as “involuntary” on a case-by-case basis.

GINA amends HIPAA to specifically bar discrimination based on genetic information and restrict the use of genetic information by group health plans and health insurers. Group health plans and health insurance companies offering group health insurance coverage in connection with a group health plan may not adjust premium or contribution amounts for a group covered under such a plan based on genetic information (29 CFR 2590.702-1). A health insurance company may increase the premium for an employer based on the manifestation of a disease or disorder of an individual who is enrolled in the plan. But the manifestation of a disease or disorder in one individual cannot also be used as genetic information about other group members (such as family members) and to further increase the premium for the employer. GINA authorizes the Department of Labor (DOL) to impose stiff financial penalties for violations.

Definitions. The following definitions apply for purposes of GINA:

GINA enforcement. GINA also bars group health plans and health insurance companies offering group health insurance coverage from requesting or requiring an individual or a family member of such individual to undergo a genetic test. This provision is not intended to limit the authority of a healthcare professional who is providing healthcare services to an individual to request that such individual undergo a genetic test. A group health plan or a health insurer may obtain and use the results of a genetic test in making a determination regarding payment for healthcare services. A group health plan or insurer may request only the minimum amount of information necessary to accomplish the intended purpose. A group health plan or a health insurer may use the results of genetic tests for research purposes but may not use such information for underwriting purposes. Genetic information may not be requested, required, or purchased for genetic underwriting purposes. In addition, a group health plan or health insurer may not request, require, or purchase genetic information about any individual before the individual’s enrollment under the plan or coverage in connection with such enrollment.

GINA and wellness programs. The EEOC’s 2016 ADA regulations were accompanied by analogous rules on incentives for employees to disclose medical information on a spouse, which technically is considered genetic information on the employee. As with the ADA rules, the 30 percent standard was vacated by the court, but the other provisions remain in effect.

A wellness program that includes spousal disclosure incentives must be reasonably designed. The employer may not condition program participation on agreeing to the sale or transfer of the spouse’s information, or deny benefits because a spouse refuses to provide it (29 CFR 1635.8(b)(2)).

Generally, employer-sponsored health plans allow employees and their dependents to enroll in coverage when the employee is first hired during “regular enrollment.” However, HIPAA requires group health plans to offer special enrollment periods under certain circumstances (29 CFR 2590.701-6). More specifically, HIPAA requires a group health plan to permit an otherwise eligible individual who did not initially enroll in a plan to have a special window to enroll if the individual:

For an individual to be considered to have lost their previous health coverage, the employee or dependent must have lost the other coverage by exhausting a COBRA period, by losing eligibility for the other coverage, or because employer contributions ceased. An individual who loses coverage simply for failing to pay the required premiums is not eligible for special enrollment under HIPAA.

In the case of a new spouse or dependent, it is the employee, spouse, and newly acquired dependent who receive special enrollment rights. Other dependents (such as siblings of a newborn child) do not receive special enrollment rights upon the birth or adoption of a child.

HIPAA’s special enrollment window is open for a limited time only. If your employee loses other health coverage, the employee must request enrollment in your health plan within 30 days of the loss of coverage. Your plan must begin coverage no later than the first day of the first calendar month that occurs after the date your plan receives the employee’s completed enrollment form.

If an employee acquires a new spouse or dependent, the employee must request enrollment within 30 days of the marriage, birth, adoption, or placement for adoption. For new coverage due to marriage, the coverage must be effective no later than the first day of the first calendar month that occurs after the date your plan receives the employee’s completed enrollment form. For newborns and newly adopted dependents, coverage must be retroactive to the date of birth or the date of adoption.

Notice requirement. On or before the time any employee is offered the opportunity to enroll in a group health plan, the plan is required to provide each employee with a description of the plan's special enrollment rules. For this purpose, the plan may use the DOL-approved model description of the special enrollment rules.

The Children’s Health Insurance Program Reauthorization Act of 2009 extends and expands the state children’s health insurance program (CHIP), allows states to subsidize premiums for employer-provided group health coverage for Medicaid and CHIP-eligible children and families, provides additional special enrollment rights, and adds notice and disclosure obligations for employers that maintain group health plans.

Special enrollment rights. A group health plan must permit an employee or dependent who is eligible, but not enrolled, for coverage under the plan to enroll for coverage under the terms of the plan if either of the following conditions is met:

The Employer CHIP Notice. An employer that maintains a group health plan must annually provide to each employee living in a state that provides premium assistance for the purchase of group health plan coverage through a Medicaid plan or CHIP with a written notice informing the employee of potential opportunities currently available in the employee’s home state. The DOL maintains a list of states offering the required assistance, which is included in the model Employer CHIP Notice that may be accessed at https://www.dol.gov.

Employers subject to the Employer CHIP Notice requirement. If a group health plan provides benefits for medical care directly (such as through a health maintenance organization) or through insurance, reimbursement, or in some other way to participants, beneficiaries, or providers in any state listed by the DOL, the plan is required to provide the Employer CHIP Notice, regardless of the employer’s location or principal place of business (or the location or principal place of business of the group health plan, its administrator, its insurer, or any other service provider affiliated with the employer or the plan).

Employees who must be provided with the Employer CHIP Notice. An Employer CHIP Notice must inform each employee, regardless of enrollment status, of potential opportunities for premium assistance in the state in which the employee resides. Thus, the notice must go to all employees who reside in one of the states listed by the DOL. The state in which the employee resides may or may not be the same as the state in which the employer, the employer’s principal place of business, the health plan, its insurer, or other service providers are located.

Notice to state Medicaid and CHIP agencies. The plan administrator of a group health plan that has participants or beneficiaries who are covered under a state Medicaid plan or a CHIP must disclose to the relevant agency, upon request, information about the benefits available under the group health plan. This disclosure is to allow the agency to determine whether it would be more cost-effective to provide medical or child health assistance by subsidizing premiums for the purchase of coverage under the employer's group health plan or to provide supplemental benefits instead. The CHIP Coverage Coordination Disclosure Form that is to be used for this purpose may be downloaded at http://www.cms.gov/FACA.

Post-COVID coverage terminations. On March 31, 2023, state agencies resumed the normal process, paused during the COVID-19 emergency, of reviewing their Medicaid and CHIP rolls and terminating beneficiaries who no longer meet the eligibility criteria. The U.S. Department of Health and Human Services (HHS) is encouraging employers to extend special enrollment rights beyond the usual 60 days for individuals who lose coverage during this process.

“Individuals losing Medicaid and CHIP should instead be able to enroll anytime during this annual redetermination process, in recognition of the complicated transition and the importance of maintaining life-saving coverage for employees and their families,” the agency stated.

HIPAA has a guaranteed availability requirement for the small group market only. Small employers are defined as those with 2 to 50 employees. Each issuer that offers health insurance coverage in the small group market must accept every small employer in the state that applies for coverage, and must accept for enrollment every eligible individual who applies for coverage during the period in which the individual first becomes eligible (45 CFR 146.150).

Insurers are required to guarantee issue. Insurers in the small group market are allowed to use rating variation based only on age (limited to a 3-to-1 ratio), rating area, family composition, and tobacco use (limited to a 1.5-to-1 ratio) in the individual and the small group market and the exchanges. If a state expands its exchange to include the large group market, the rating variation limits will also apply in that market.

An issuer offering group health insurance coverage in the small or large market is required to renew or continue in force coverage at the option of the plan sponsor (45 CFR 146.152). Coverage need not be renewed for one or more of the following reasons: nonpayment of premiums; fraud; violation of participation or contribution rules; termination of coverage in the market in accordance with state law; for network plans, no enrollees in the service area; and for membership associations, when membership ceases.

Exceptions to guaranteed renewability also apply if the issuer or plan no longer offers a particular type of group coverage in the small or large group market, so long as the issuer, in accordance with state law:

Another exception applies upon discontinuance of all coverage. The issuer, however, would be barred from offering coverage in the market and state involved for 5 years. Modifications of a product within a market are allowed if the modification was effective on a uniform basis among group health plans that used the product.

Insurers are required to guarantee renewability. Insurers in the small group market are allowed to use rating variation based only on age (limited to a 3-to-1 ratio), rating area, family composition, and tobacco use (limited to a 1.5-to-1 ratio) in the individual and the small group market and the exchanges. If a state expands its exchange to include the large group market, the rating variation limits will also apply in that market.

Insurers and plans generally may not rescind coverage unless there is fraud or an individual makes an intentional misrepresentation of material fact. This provision applies to both existing (grandfathered) and new plans. A group health plan or insurer offering group health insurance coverage must provide at least 30 days' advance written notice to each participant who would be affected before coverage may be rescinded, regardless of whether the coverage is insured or self-insured, and regardless of whether the rescission applies to an entire group or only to an individual within the group.

A rescission is a cancellation or discontinuance of coverage that has a retroactive effect. For example, a cancellation that treats a policy as void from the time of the individual’s or group’s enrollment is a rescission. As another example, a cancellation that voids benefits paid up to a year before the cancellation is also a rescission for this purpose. A cancellation or discontinuance of coverage is not a rescission if it has only a prospective effect or it is effective retroactively to the extent it is attributable to a failure to timely pay required premiums or contributions toward the cost of coverage.

Under federal law, health plans must provide certain benefits or provide certain benefits at specified minimum levels if the benefit is provided. These provisions, unlike state-law benefit mandates, cover both insured and self-insured plans.

The NMHPA requires postdelivery hospitalization coverage for at least 48 hours following a normal delivery and 96 hours following a cesarean section. Plans are barred from offering incentives or imposing penalties to encourage mothers to stay less time in the hospital. A decision to leave early may be made by the mother or the mother's healthcare provider after consulting with the mother. Copayments, deductibles, or other cost-sharing provisions applied to postdelivery hospitalization may not be greater than those for predelivery hospitalization. Plans and insurers may not require a provider to obtain prior authorization for prescribing a length of stay that does not exceed the 48- or 96-hour minimums. Information about this coverage must be included in the plan's summary plan description.

The MHPAEA, enacted in 2008, applies to most employers with more than 50 employees and is designed to provide mental health parity by making sure mental health and substance use disorder (MH/SUD) benefits offered by health plans are equivalent to the medical/surgical benefits the plans offer.

Defining basic terms. According to the final regulations, group health plans define the terms “mental health benefits” and “substance use disorder benefits,” but the definitions must be in accordance with applicable federal and state laws (29 CFR 2590.712(a)). The regulations also provide that the terms must be “consistent with generally recognized independent standards of current medical practice.” The regulations give a few examples of resources that would meet this requirement, including:

The general parity requirement. The main goal of the MHPAEA is to achieve parity regarding a plan’s financial requirements and treatment limitations. Financial requirements include copayments, deductibles, coinsurance, and out-of-pocket expenses and do not include aggregate lifetime or annual dollar limits (29 CFR 2590.712(a)). Treatment limitations include limits on treatment frequency (e.g., one therapy session per week), number of visits (e.g., 35 visits per year to a mental health professional), days of coverage (e.g., 30-day hospital stays), days in a waiting period, and other similar limits on the scope or duration of treatment.

Classification of benefits. The final regulations make clear that parity analysis must be conducted on a classification-by-classification basis. More specifically, a plan cannot apply “any financial requirement or treatment limitation to mental health or substance use disorder benefits in any classification that is more restrictive than the predominant financial requirement or treatment limitation of that type applied to substantially all medical/surgical benefits in the same classification” (29 CFR 2590.712(c)(2)(i)).

The regulations divide benefits into the following six classifications:

The regulations do allow plans and issuers to divide benefits furnished on an outpatient basis into two subclassifications:

However, the regulations do not allow any other subclassifications, including, for example, the separate classification of generalists and specialists.

The final regulations also provide that if a plan (or health insurance coverage) provides in-network benefits through multiple tiers of in-network providers, the plan may divide its benefits furnished on an in-network basis into subclassifications that reflect those network tiers (29 CFR 2590.712(c)(3)(iii)(A)). However, such tiering must be based on reasonable factors and without regard to whether a provider is an MH/SUD provider or a medical/surgical provider.

Treatment limitations. The regulations provide that the parity requirements apply to both quantitative and nonquantitative treatment limitations. A “quantitative treatment limitation” is a limitation that is expressed numerically, such as an annual limit of 50 outpatient visits per year (29 CFR. 2590.712(a)). A “nonquantitative treatment limitation” (NQTL) is a limitation that is not expressed numerically but otherwise limits the scope or duration of benefits for treatment. A permanent exclusion of all benefits for a specific condition or disorder is not a treatment limitation. NQTLs include:

Application of the parity requirement to NQTLs. The regulations generally prohibit imposing any NQTL on MH/SUD benefits unless certain requirements are met. Any processes, strategies, evidentiary standards, or other factors used in applying the NQTL to MH/SUD benefits in a classification must be comparable to, and applied no more stringently than, the processes, strategies, evidentiary standards, or other factors used in applying the limitation with respect to medical/surgical benefits in the classification (29 CFR 2590.712(c)(4)(i)).

Availability of plan information. The criteria for medical necessity determinations made under the plan for MH/SUD benefits must be made available by the plan administrator or the health insurance issuer offering the coverage to any current or potential participant, beneficiary, or contracting provider upon request (29 CFR 2590.712(d)(1)).

The reason for any denial under the plan (or coverage) of reimbursement or payment for services for MH/SUD benefits must be made available by the plan administrator or health insurance issuer to the participant or beneficiary as provided by the ERISA claims procedure regulations (29 CFR 2590.712(d)(2)).

Small employer exemption. In general, employers that have 50 or fewer employees are totally exempt from the requirements of the MHPAEA (29 USC 1185a(c)(1) and 29 CFR 2590.712(f)). Employers that employed at least two employees but not more than 50 employees on business days during the preceding calendar year are exempt from these requirements. Moreover, the parity rules do not apply to any group health plan for any plan year if, on the first day of the plan year, the plan has fewer than two participants who are current employees (29 CFR 2590.712(f)(1)).

Note: For nonfederal governmental plans, a “small employer” is an employer with 100 or fewer employees (42 USC 300gg-26(c)(1)).

Cost exemption. The MH/SUD parity requirements do not apply during the next plan year to a group health plan if their application would result in an increase for the current plan year of the actual total costs of coverage for medical/surgical benefits and MH/SUD benefits by an amount that exceeds the “applicable percentage” of the actual total plan costs (29 CFR 2590.712(g)(1)). The applicable percentage is 2 percent for the first plan year in which the new parity requirements apply and 1 percent in each subsequent plan year (29 CFR 2590.712(g)(2)).

A group health plan that elects to implement a cost exemption must promptly notify the DOL, the appropriate state agencies, and participants and beneficiaries in the plan of the election.

Required NQTL analyses. The Consolidated Appropriations Act of 2021 (CAA) placed additional requirements on plan sponsors to demonstrate that MH/SUD benefits are being provided on a par with medical/surgical benefits. Group health plans that impose NQTLs must perform comparative analyses of how these limits are designed and applied, and have them available in case the DOL or another agency requests them.

These analyses must address:

These comparative analyses should be sufficiently specific, detailed, and reasoned to demonstrate whether the processes, strategies, evidentiary standards, or other factors used in developing and applying an NQTL are comparable and applied no more stringently to MH/SUD benefits than to medical/surgical benefits, according to DOL guidance. A general statement of compliance, coupled with a conclusory reference to broadly stated processes, strategies, evidentiary standards, or other factors, will not be considered sufficient.

Proposed changes to MHPAEA rules. Proposed rule changes published August 3, 2023 (88 Fed. Reg. 51552) could impose major new burdens on the design, administration, and documentation of mental health benefits, especially where NQTLs are concerned.

Under the existing rules, quantitative treatment limitations may not be more restrictive than the “predominant” limit that applies to “substantially all” medical benefits in any one of six specified categories (see above). The proposal would extend this predominant/substantially all test to NQTLs as well. Thus, for example, unless a prior authorization requirement applied to two-thirds of outpatient medical/surgical benefits, no such requirement could be applied to outpatient MH/SUD benefits.

The existing requirement that an NQTL be based on comparable factors applied no more stringently would be retained, with the additional proviso that the plan could not rely on a factor or evidentiary standard that “discriminates” against MH/SUD benefits by being “biased or not objective, in a manner that results in less favorable treatment.” In addition, these restrictions on NQTL application would now extend to NQTL design as well.

Any NQTL would also have to be supported by an analysis of outcomes data to determine whether the limit disfavors MH/SUD benefits in practice. If the analysis turned up “material differences in access” between MH/SUD and medical benefits, the plan would have to take “reasonable action” to address that disparity.

An NQTL would be exempted from the above requirements if it impartially applies generally recognized independent professional medical or clinical standards, consistent with generally accepted standards of care. The “no more restrictive” prong would not apply to an NQTL that is reasonably and narrowly designed to detect or prevent waste, fraud, and abuse.

The proposed rule also would flesh out the comparative analysis requirements added by the CAA (see above). To address deficiencies the DOL and other agencies have found in these analyses, the plan would need to identify all the factors and underlying evidentiary standards used to design or apply an NQTL, and demonstrate that these are applied no more stringently to MH/SUD benefits than to medical/surgical benefits in any of the six categories—either in the written plan terms or in operation. A plan fiduciary would be required to certify that the analysis met the rule’s content requirements.

The WHCRA requires that group health plans that cover mastectomies also cover reconstructive breast surgery following a mastectomy. The WHCRA requires not only reconstruction of the breast on which the mastectomy was performed, but also surgery and reconstruction of the other breast to produce a symmetrical appearance. Also mandated is coverage for prostheses and physical complications of mastectomy such as lymphedemas. The law specifically leaves it to the patient and the attending physician to determine how the covered services are to be provided.

The WHCRA's requirements apply only to group health plans and health insurance issuers that provide coverage for a mastectomy. Coverage of mastectomies is not mandated. The WHCRA also does not prohibit group health plans and health insurance issuers from imposing deductibles or coinsurance requirements for health benefits relating to reconstructive surgery in connection with a mastectomy as long as such requirements are consistent with those established for other benefits under the plan. State laws that require at least the same level of coverage as the WHCRA are not superseded.

Notice requirements. Both group health plans and group health insurers are required to give participants and beneficiaries notice of the availability of this mandate upon enrollment and annually thereafter.

The PDA prohibits discrimination based on pregnancy, childbirth, or related medical conditions. Please see the national Maternity and Pregnancy section.

Michelle’s Law prohibits group health plans from terminating the health coverage of a college, university, or trade school student who is a “dependent child” solely because the student takes a medically necessary leave of absence. If Michelle’s Law applies, the group health plan must provide the same benefits as if the student had not taken a leave for 1 year after the first day of the leave (or if earlier, the date coverage would otherwise have terminated under the terms of the plan or health insurance coverage).

Under the ACA, group health plans and issuers are generally required to provide dependent coverage to age 26, regardless of the dependent’s student status (see below). Nonetheless, under some circumstances, such as a plan that provides dependent coverage beyond the age of 26, Michelle's Law may still apply. The DOL provides additional information here: http://webapps.dol.gov.

Group health plans and health insurers that offer group or individual coverage that covers dependents must allow coverage of dependents on a parent’s plan until the dependent’s 26th birthday. There is no requirement to make coverage available to a grandchild even if that child’s parent is covered as a dependent.

Regulations defining which dependents are eligible for coverage specify that a plan or insurer must define “dependent” for purposes of eligibility for dependent coverage of children in terms of a relationship between a child and the plan participant (IRS Reg. Sec. 54.9815-2714). Thus, a plan may not deny or restrict coverage for a child who has not attained the age of 26 based on the presence or absence of the child's financial dependency (upon the participant or any other person), residency with the participant or with any other person, student status, employment, or any combination of those factors. In addition, a plan may not deny or restrict coverage of a child based on eligibility for other coverage.

Keeping track of the coverage eligibility of dependents has always been a problem for employers. Employers should obtain all the information needed for determining dependents’ coverage eligibility and keep it up to date to minimize paying for ineligible dependents. Many states have existing laws that require insured plans to provide similar or more expansive coverage of dependents. These provisions still apply to insured plans in those states.

Age distinctions. The terms of a group health plan or health insurance coverage providing dependent coverage of children cannot vary based on age (except for children who are aged 26 or older).

Both coverage under an employer-provided health plan and amounts paid or reimbursed under such a plan for medical care expenses of an employee’s child who has not attained the age of 27 as of the end of the employee’s taxable year are excluded from the employee’s gross income under IRC Sec. 105(b) and IRC Sec. 106. An employer may assume an employee’s taxable year is the calendar year.

For this purpose, a child is the son, daughter, stepson, or stepdaughter of the employee, including those who are legally adopted or lawfully placed with the employee for legal adoption and “eligible foster children,” defined as individuals who are placed with an employee by an authorized placement agency or by judgment, decree, or court order. This provision applies to a child of the employee even if the child is not the employee’s dependent within the meaning of IRC Sec. 152(a). Thus, the age limit, residency, support, and other tests described in IRC Sec. 152(c) do not apply to a child for this purpose.

The ACA prohibits group health plans (including grandfathered plans) and health insurance issuers that offer group health plans from establishing lifetime dollar limits on the “essential health benefits” provided by the plan (29 CFR 2590.715-2711). This means that plans may not, for example, place a cap on the lifetime dollar amount of coverage for emergency services or preventive care, because those benefits are considered essential under the ACA.

The ACA lists the following categories that must be considered essential health benefits:

Additionally, annual dollar-amount limits on essential benefit coverage are prohibited. Lifetime and annual limits may continue for benefits that are not “essential,” provided that such limits are permitted under state and federal law.

Insurers and group health plans must provide coverage without cost sharing for preventive services (26 CFR 54.9815-2713); this provision does not apply to grandfathered plans. Related regulations provide that, generally, a group health plan or a health insurer offering group health insurance coverage must provide coverage for all of the following items and services without any cost-sharing requirements (such as a copayment, coinsurance, or deductible) for the items or services:

A plan may provide coverage for services in addition to those recommended and may deny coverage for services that are not recommended. A complete list of the current recommended preventive services is available at https://www.healthcare.gov.

The Braidwood case. A federal district court vacated the preventive care coverage requirements as applied to recommendations added by the USPSTF since the ACA’s enactment. The court found that that body lacked the necessary authority to impose legally binding requirements because its members had not undergone the appointment and confirmation process (Braidwood Mgmt. Inc. v. Becerra, 2023 U.S. Dist. LEXIS 54769 (N.D. Tex., March 30, 2023)).

HHS is appealing the decision, and clarified its effect in April 2023 guidance. The 5th U.S. Circuit Court of Appeals stayed the lower court ruling while the appeal is pending, meaning the requirements at issue remain in effect nationwide.

Women's preventive services guidelines. HHS has issued guidelines on women's preventive services supported by the HRSA. Nongrandfathered plans and issuers are required to provide coverage without cost sharing consistent with these guidelines. The listing of services that must be covered, depending on age and other circumstances, is revised frequently but it includes:

Health plans must cover without cost sharing any contraceptive services and FDA-approved, -cleared, or -granted contraceptive products that an individual and attending provider have determined to be medically appropriate, whether or not such a service or product is specifically identified in the categories listed in the HRSA guidelines, according to July 2022 guidance from the agencies. Plans may use reasonable medical management techniques but must cover at least one substantially similar product or service without cost sharing.

For additional information on women’s preventive services guidelines, visit https://www.hrsa.gov.

The contraceptive coverage requirement is subject to broad exemptions for employers with religious or moral objections. Regulations issued in 2018 allow any private employer (except publicly traded companies) with a sincerely held religious or moral objection to opt out of covering contraception. The U.S. Supreme Court upheld the rules in Little Sisters of the Poor v. Pennsylvania, 140 S. Ct. 2367 (July 8, 2020).

Rule changes proposed February 2, 2023 (88 Fed. Reg. 7236), would eliminate the moral objection and provide a new avenue for individuals denied contraception on religious grounds to obtain it directly from a healthcare provider. The provider, in turn, could seek reimbursement from an insurer on the ACA exchange.

Cost-sharing requirements and office visits. Because an office visit where preventive services are provided may include other services, the regulations provide the following clarifications of the cost-sharing requirements when a recommended preventive service is provided during an office visit:

Out-of-network providers. The regulations make clear that a plan that has a network of providers is not required to provide coverage for recommended preventive services delivered by an out-of-network provider and may also impose cost-sharing requirements for recommended preventive services delivered by an out-of-network provider. However, if a plan or issuer does not have a provider in its network that can provide the recommended preventive services, the plan or issuer must cover the item or service when performed by an out-of-network provider and may not impose cost sharing with respect to the item or service.

Reasonable medical management. The regulations provide that a plan or issuer can use reasonable medical management techniques to determine the frequency, method, treatment, or setting for recommended preventive services to the extent such details are not specified in the relevant recommendation or guideline.

Insurers and plans must limit any waiting periods for coverage to 90 days (26 CFR 54.9815-2708). The regulations define a “waiting period” as the period that must pass before coverage for an individual, who is otherwise eligible to enroll under the terms of a group health plan, can become effective. If an individual enrolls as a late enrollee or a special enrollee, any period before such late or special enrollment is not a waiting period.

Eligibility. Under the regulations, in general, for individuals to be eligible to enroll under the terms of a group health plan, they must have met the plan’s substantive eligibility conditions. Such eligibility conditions include, for example:

However, the regulations make clear that nothing in this section requires a plan sponsor to offer coverage to any particular individual or class of individuals (e.g., part-time employees). The regulations just prohibit requiring otherwise eligible individuals to wait more than 90 days before coverage is effective.

Eligibility conditions based solely on the lapse of a time period are permissible for no more than 90 days. Other conditions for eligibility under the terms of a group health plan are generally permissible unless the condition is designed to avoid compliance with the 90-day waiting period limitation.

Variable-hour employees. If a group health plan conditions eligibility on an employee regularly having a specified number of hours of service per period (or working full-time), in some cases, it may not be possible to determine whether a newly hired employee is reasonably expected to regularly work that number of hours per period (or work full-time). In this situation, the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition. This “reasonable period of time” cannot exceed 12 months and must begin on any date between the employee’s start date and the first day of the first calendar month following the employee’s start date.

Except in cases in which a waiting period that exceeds 90 days is imposed in addition to a measurement period, the time period for determining whether such an employee meets the plan’s eligibility condition will not be considered to be designed to avoid compliance with the 90-day waiting period limitation if coverage is made effective no later than 13 months from the employee’s start date plus, if the employee’s start date is not the first day of a calendar month, the time remaining until the first day of the next calendar month.

Cumulative service requirements. If a group health plan or health insurance issuer conditions eligibility on an employee’s having completed a number of cumulative hours of service, the eligibility condition is not considered to be designed to avoid compliance with the 90-day waiting period limitation if the cumulative hours-of-service requirement does not exceed 1,200 hours.

Limitation on orientation periods. An orientation period is permitted only if it does not exceed 1 month. For this purpose, 1 month is determined by adding 1 calendar month and subtracting 1 calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage. For example, if an employee’s start date in an otherwise eligible position is May 3, the last permitted day of the orientation period is June 2.

Counting days. Under this section, all calendar days are counted beginning on the enrollment date, including weekends and holidays. A plan or issuer that imposes a 90-day waiting period may, for administrative convenience, choose to permit coverage to become effective earlier than the 91st day if the 91st day is a weekend or holiday.

A health insurance issuer that offers health insurance coverage in the individual or small group market must ensure that the coverage includes the essential health benefits package (as discussed above).

Group health plans are subject to certain cost-sharing limits. For more on such limitations on cost sharing, visit http://www.dol.gov.

Nongrandfathered plans must provide coverage of certain costs of clinical trials. Thus, a group health plan will not be allowed to:

Nongrandfathered group health plans must provide patient protections that:

Designation of a primary care provider. If a group health plan or a health insurer issuer offering group health insurance coverage requires or provides for designation of a participating primary care provider, the plan or insurer must permit each participant or beneficiary to name any participating primary care provider who is available to accept the participant or beneficiary. The plan or insurer must inform each participant of the provision on designation of a primary care provider.

Designation of a pediatrician as a primary care provider. If a group health plan or a health insurer issuer offering group health insurance coverage requires or provides for the designation of a participating primary care provider for a child by a participant or beneficiary, the plan or insurer must permit the participant or beneficiary to name a physician (allopathic or osteopathic) who specializes in pediatrics as the child’s primary care provider if the provider participates in the plan or insurer's network and is available to accept the child. The plan or insurer must inform each participant of the provision on designation of a pediatrician as the child’s primary care provider.

Access to obstetrical and gynecological care. A group health plan or a health insurer offering group health insurance coverage may not require authorization or referral by the plan, insurer, or any person (including a primary care provider) if a female participant or beneficiary seeks coverage for obstetrical or gynecological care provided by a participating healthcare professional who specializes in obstetrics or gynecology. The plan or insurer must inform each participant of the provision on access to obstetrical and gynecological care. The plan or insurer may require such a professional to agree to follow its policies and procedures, including procedures regarding referrals and obtaining prior authorization and providing services pursuant to a treatment plan (if any) approved by the plan or issuer.

A healthcare professional who specializes in obstetrics or gynecology is any individual (including a person other than a physician) who is authorized under applicable state law to provide obstetrical or gynecological care.

Obstetrician/gynecologist as primary care provider. A group health plan or a health insurer offering group health insurance coverage must treat a participating healthcare professional who specializes in obstetrics or gynecology the same as a primary care provider when providing obstetrical and gynecological care and ordering related obstetrical and gynecological items and services. The obstetrical or gynecological provider may be required to notify the primary care healthcare professional or the plan or insurer of the provider’s treatment decisions.

Notice of right to designate a primary care provider. If a group health plan or insurer requires the designation of a primary care provider, the plan or insurer must provide a notice informing each participant of the provision on naming a primary care provider and the participant's rights in this regard. The notice must be included whenever the plan or insurer provides a participant with a summary plan description or other similar description of benefits under the plan or coverage.

Model language. DOL regulations provide model language for use to satisfy this notice requirement. The model language can be located on the DOL’s website at https://www.dol.gov.

Coverage of emergency services. The ACA included coverage requirements and cost-sharing limits for emergency services. For plan years beginning in 2022 and later, these are replaced by the surprise billing rules discussed below.

Various new rules on health cost transparency and surprise billing are imposing elaborate disclosure requirements on many group health plans and their service providers.

In July 2022, requirements issued in 2020 began taking effect for group health plans to make detailed pricing information available to the public in machine-readable files. In 2023 and 2024, plans and their insurers must make available to enrolled participants and beneficiaries personalized out-of-pocket cost information for all covered healthcare items and services through an Internet-based self-service tool and in paper form on request.

The CAA included additional transparency requirements. Health plans must provide certain information on the cost of a service in advance of treatment or on request, and may not agree to “gag clauses” in their contracts with healthcare providers, third-party administrators (TPAs), or other service providers.

As fleshed out in a November 2021 interim rule, the CAA requires employers to report certain prescription drug and other healthcare spending annually through a federal portal. Submittals are due June 1 for the previous year’s data. TPAs and pharmacy benefit managers may submit the information on the plan’s behalf, but coordination will be needed, especially if multiple plans or vendors are involved.

The CAA also included the No Surprises Act (NSA), the product of repeated congressional efforts to protect patients from unexpected medical bills. If a group health plan covers any emergency services, it must cover all such services, whether in network or out of network, without preauthorization and pay the healthcare provider the difference between a “recognized” cost-sharing amount and the out-of-network rate.

If the provider considers this payment inadequate and negotiations fail to resolve the disagreement within 30 days, either party may initiate independent dispute resolution (IDR). An August 2022 final rule explained how to calculate the cost-sharing rate a participant owes, the amount the plan must pay the healthcare provider, and how a DOL-certified arbitrator is to weigh the competing claims of the plan and provider when they go to IDR. However, the process and criteria have been hotly litigated and the outcome remains uncertain.

Most plan sponsors can delegate many of the nuts and bolts of compliance to TPAs or other service providers. But because the plan itself bears the legal responsibility for compliance, it’s important to check the contracts with these outside parties and make sure they’re working on all of the required items. Please see the national Benefits Recordkeeping and Disclosures section.

In response to the COVID-19 pandemic, Congress included new coverage mandates and other health benefits provisions in the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act. These requirements apply until the end of the HHS-declared “public health emergency” (PHE), which occurred on May 11, 2023.

Requirements during the PHE. The FFCRA required both health insurers and self-funded plans to cover approved COVID-19 testing products and their administration without imposing any cost-sharing, prior authorization, or other medical management requirements. The mandate applied even to plans grandfathered under the ACA.

Plans also were required to cover “items and services furnished to an individual” during visits to a healthcare provider, urgent care center, or emergency room that result in a COVID-19 test, to the extent the item or service relates to administering the test or evaluating the need for it. A healthcare provider office visit is defined to include both in-person and telehealth visits.

The CARES Act expanded on the FFCRA by clarifying that testing at out-of-network healthcare providers be covered, and set forth criteria for determining a reimbursement rate. If a health plan or insurer did not previously have a negotiated rate with a testing provider, it had to pay the provider’s cash price, as listed on a public website, unless a lower rate could be negotiated.

“Group health plans” subject to these requirements included both insured and self-insured group health plans, according to clarifying guidance from the DOL, HHS, and Treasury. They included private ERISA plans, nonfederal government plans, and church plans. However, the rules did not apply to short-term, limited-duration insurance; retiree plans; or “excepted” benefits such as limited-scope dental and vision.

The exact scope of the health coverage mandate for COVID-19 testing was clarified in a second round of guidance. “Diagnostic” tests had to be covered on a first-dollar basis, but not “screening” tests taken for return-to-work or public health purposes. This document also addressed notice requirements, telehealth coverage, and the interaction of COVID-19 emergency relief with existing benefits laws.

The ACA preventive care rules were amended on November 6, 2020 (85 Fed. Reg. 71142), to reflect the CARES Act’s vaccine coverage requirements. These amendments expired with the end of the PHE, though COVID vaccines still must be covered on a first-dollar basis when provided in-network (see below).

During the PHE, required testing coverage included first-dollar coverage for each enrolled individual to buy as many as eight at-home COVID-19 tests in a month, the agencies announced in January 2022. The requirement applied to the kinds of over-the-counter (OTC) tests that are available without a healthcare provider’s order or an individualized clinical assessment. Ambiguities raised about this coverage mandate for at-home tests were further clarified in follow-up guidance from the agencies.

End of the PHE. Health plans are not required to cover COVID diagnostic tests and associated services furnished after May 11, 2023. If they do, plans once again may impose cost-sharing, prior authorization, and other medical management requirements, according to guidance from the DOL, HHS, and Treasury. However, plans and issuers were encouraged to continue providing this coverage on a first-dollar basis.

COVID vaccines remain covered by the ACA’s preventive care mandate, so nongrandfathered plans must continue to cover them on a first-dollar basis when provided in network (or out of network, if the plan has no in-network providers).

If such a coverage change would affect the terms of the plan’s Summary of Benefits and Coverage, the plan generally must provide 60 days’ advance notice of the change. However, the agencies stated they consider the advance notice requirements to be met if the plan either:

Employers and the plan administrators of group health plans that receive an order from a state domestic relations court or a state agency (such as a Medicaid agency or other welfare department) requiring that the plan enroll a child of a plan participant must obey the order if the administrator determines that the order is a QMCSO. Such an order may require coverage of a child who does not live with the plan participant and may require withholding from the participant's wages to pay for the employee's share of the plan premiums. For an order to be a QMCSO, it must include the following information:

A QMCSO may generally not require a plan to provide any benefit or option not otherwise provided under the plan. The plan must have a written procedure for determining if an order is a QMCSO. The child must be allowed to designate a representative to receive required notices from the plan.

When a medical support order is received, the plan administrator must promptly notify the participant and the children of the receipt and of the plan's procedures for determining if the order is a QMCSO. A child who is covered under a plan pursuant to a QMCSO is considered as a plan participant and not a beneficiary for purposes of ERISA's reporting and disclosure requirements. Reimbursements of covered expenses paid by the child or their custodial parent or legal guardian must go to the child or the custodial parent or legal guardian and not to the employee. In some cases, the payment may go to a state official whose name and address have been substituted for the child's address in the order.

National Medical Support Notice (NMSN). The DOL and HHS have adopted an NMSN for use by state agencies to notify the employer of a noncustodial parent that a state court or administrative agency has issued a child support order requiring the employer's group health plan to provide coverage for the child of the noncustodial parent and to serve as a QMCSO. The two-part notice includes:

The notice is first sent to the employer, which then has 20 business days to forward Part B to the plan administrator. If the administrator determines that the order is a QMCSO, the employer is obligated to determine whether withholding limitations or prioritizations allow the amount required to obtain the child's coverage from the employee's income and, if appropriate, withhold and send the necessary funds to the health plan. When properly filled out, the Notice is a QMCSO.

Employees' spouses and dependents are generally covered under all types of group health insurance. Many families, however, include two employees whose employers both provide health insurance. Elaborate rules are in effect to apportion responsibility among health plans and prevent duplicate payment.

Under ground rules established by the National Association of Insurance Commissioners (NAIC), coordination of benefits (COB) operates on a sequential basis. This means it determines which plan pays its benefits first (the primary plan) and which pays its benefits second (the secondary plan). It does so by establishing a series of order of benefit determination (OBD) rules that are to be applied in a specified sequence.

Different rules and principles apply when there is coordination between (or among) privately sponsored health plans and Medicare, Medicaid, and other government healthcare programs. Likewise, different rules apply between medical payment programs under auto liability and no-fault insurance policies and workers’ compensation, as well as subrogation and reimbursement.

Health plans are not required to use COB, but a plan that does not is automatically designated to be primary. The NAIC Model Regulation does not have direct legal effect but has been implemented by most states, although different states have adopted different versions. Self-insured group health plans are exempt from these state rules, due to ERISA preemption, but most follow them anyway.

Once the order of benefits is determined, the primary plan pays its benefits or provides its services exactly as it would in the absence of duplicate coverage. The secondary plan pays the difference between some maximum amount (which is never more than the total expenses actually incurred, but which can be less) and whatever the primary plan paid.

OBD rules. The OBD rules, under the NAIC version issued in 2005 (and tweaked in 2013 to reflect the ACA), are as follows:

Secondary plan’s responsibility. The NAIC Model requires secondary plans to pay benefits so that a plan participant with duplicate coverage incurs no out-of-pocket expenses during a plan year—an approach called “classic COB.”

However, many self-insured ERISA plans instead follow a “preservation COB” approach under which the secondary plan determines how much it would have paid had it been primary, then subtracts whatever the primary plan actually paid and pays the difference, if any. Doing so effectively “preserves” the secondary plan’s deductibles, coinsurance, or copayments and exclusions.

Self-insured plans are prohibited from discriminating in favor of the highly compensated. The ACA extends this prohibition to nongrandfathered, fully insured group health plans. However, enforcement of this provision has been delayed pending new regulatory guidance, so it is not yet in effect for fully insured plans.

ERISA has a variety of reporting and disclosure requirements, including special requirements that apply to summary plan descriptions (SPDs) and summaries of plan modifications of group health plans. There is more information available on specific ERISA requirements, as well as the ACA reporting and disclosure requirements. Please see the national Benefits Recordkeeping and Disclosures section.

Health insurers in the individual and small group market must maintain a medical loss ratio (MLR) of 80 percent, and insurers in the large group market must maintain an MLR of 85 percent. Insurers must provide a rebate to each enrollee on a pro rata basis equal to the amount of premium revenue spent on nonmedical costs that exceed the percentage limits. The MLR is the ratio of the amount of premium revenue expended by the issuer on reimbursement for clinical services provided to enrollees and for activities that improve healthcare quality to the total amount of premium revenue (excluding federal and state taxes and licensing or regulatory fees and after accounting for payments or receipts for risk adjustment, risk corridors, and specified reinsurance for the plan year).

Group health benefit plans covered by ERISA are required to have a reasonable claims procedure that must be set out in the plan's SPD. The description of the claims procedure must include the circumstances that might result in the loss or denial of benefits and the procedure for making a claim for benefits, including the procedures for appealing a claim denial. ERISA requires that claim denials must be in writing and must include a clear explanation of the specific reasons for the denial. The plan document and the SPD must provide a procedure for appealing a denial to an authorized plan official or committee for a full and fair review.

Most states require group health insurance policies to cover specific services. For full details, check with your state insurance commissioner. ERISA exempts self-insured plans from regulation by state insurance laws and from the requirement to include mandated benefits. Self-insured employers that operate in more than one state can offer uniform benefits at all of their sites.

Coverage during leaves. The federal Family and Medical Leave Act (FMLA) requires employers to maintain group health insurance coverage for employees during FMLA leave. The coverage must be at the same level and with the same conditions that would have existed if the employee had not taken the leave. During the leave period, the employer and employee continue to pay their usual portions of the premium. Employees must also be allowed to continue coverage under medical reimbursement plans during an FMLA leave. The FMLA applies to employers with 50 or more employees.

Age bias. The Age Discrimination in Employment Act (ADEA) requires employers with 20 or more employees to provide the same health insurance benefits to employees and their spouses aged 40 years and older as are provided to younger employees and their spouses.

Disability discrimination. The ADA makes it illegal for employers to discriminate in the provision of health benefits based on a disability covered by the ADA. Employees with disabilities must have equal access to insurance coverage. The ADA covers employers with 15 or more employees

The ADA also affects employee wellness programs (see above).

HIPAA administrative simplification and privacy. HIPAA mandates the adoption of a series of provisions to simplify and ensure the privacy and security of healthcare information. These provisions have both direct and indirect impacts on employer-sponsored group health insurance plans. Please see the national Health Information Privacy (HIPAA) section.

Coverage after termination. Both COBRA and many state laws give employees the right to continue coverage and/or convert to individual policies after leaving the group. Please see the national COBRA (Health Insurance Continuation) section.

One form of health plan design that has become very popular is consumer-driven health care, including defined-contribution health plans such as health savings accounts (HSAs) and health reimbursement arrangements (HRAs) intended to make employees more conscious of, and responsible for, the cost of their health care.

Employers were given new latitude to band together to offer health coverage, under final regulations that the DOL published June 21, 2018 (83 Fed. Reg. 28912). However, much of the rule has been put on hold after a federal court invalidated key provisions (see below).

As finalized, the rule allowed employers with a “commonality of interest” to offer joint coverage without many of the restrictions that previously applied to coverage provided through associations. A group offering such an association health plan (AHP) must have at least one “substantial business purpose” besides providing benefits, though doing so still may be its principal purpose.

Specifically, the AHP rule amended ERISA’s definition of “employer” to include an association of employers linked by industry or geography. Although employers of all sizes would be eligible for the rule’s new AHP option, employers currently in the small group or individual market would likely be most interested, because combining in an association that covers 50 or more employees would put them in the large group market, where ACA requirements like essential health benefits do not apply.

AHPs under the rule still would be subject to HIPAA’s nondiscrimination rules, which prohibit varying eligibility or benefits among SSIs based on a health factor (see above). AHPs also would remain subject to state regulation.

Court ruling. A federal district court struck down key provisions of the AHP rule as inconsistent with ERISA and the ACA (New York v. U.S. Department of Labor, 363 F. Supp. 3d 109 (D.D.C., March 28, 2019)).

The court found that the rule’s new, broader standard for a bona fide association “fails to establish meaningful limits on the types of associations that may qualify to sponsor an ERISA plan, thereby violating Congress’s intent that only an employer association acting ‘in the interest of’ its members falls within ERISA’s scope.” The DOL appealed the ruling, but the incoming Biden administration put this process on hold.

The Data Marketing case. In a related case, however, a federal appeals court called into question the DOL’s narrow definition of “employer” in this context. In Data Marketing Partnership LP v. U.S. Department of Labor, 45 F.4th 846 (5th Cir., August 17, 2022), the 5th Circuit threw out a DOL advisory opinion that had denied a marketing firm’s attempt to sponsor an ERISA plan that would cover individuals who agreed to install the company’s software and share customer data.

The appellate court remanded the case to the district court to determine whether covered individuals could actually qualify for ERISA plan participant status as “working owners” or “bona fide partners.” If so, the decision could open a new avenue for small employers to band together and avoid both ACA small group mandates and state insurance regulation. On the other hand, there are concerns that regulatory safeguards against dubious “multiple employer welfare arrangements” could be undermined.