Prior to Obamacare, most employers weren’t legally required to offer health insurance coverage to their workers. Now, if you have more than 50 employees, it’s mandated by law. And it remains standard practice if you want to attract the best employees.
If you have an employee health insurance plan, what are your requirements when it comes to altering or rescinding coverage? Two recent cases have highlighted employers’ requirements under the federal Employee Retirement Income Security Act (ERISA), which governs employers’ responsibilities to give covered employees notice of all benefits coverage and changes.
ERISA Over Everything
Under ERISA, employers are required to give 60 days’ notice before any material modification to your benefits coverage. But what qualifies as a material modification? Any reduction or removal of benefits, changes to the responsibilities of individuals enrolled in the plan, and any changes to plan eligibility criteria.
Additionally, if there is going to be a material reduction of benefits, you must give employees notice no later than 60 days after the date of adoption of the modification or change. Federal law defines “material reduction” as “any modification to the plan [that] would be considered by the average plan participant to be an important reduction in covered services or benefits under the plan,” including any change that:
…eliminates benefits payable under the plan; reduces benefits payable under the plan, including a reduction that occurs as a result of a change in formulas, methodologies or schedules that serve as the basis for making benefit determinations; increases premiums, deductibles, coinsurance, copayments, or other amounts to be paid by a participant or beneficiary; reduces the service area covered by a health maintenance organization; establishes new conditions or requirements (e.g., preauthorization requirements) to obtaining services or benefits under the plan.
Part of your notice requirement as an employer includes advising workers of their right to purchase temporary extension of group health coverage, like COBRA, when their work coverage is lost due to a “qualifying event.”
Every Little Change
Does that mean you need to keep employees apprised of every detail of their coverage and plan contributions? Not necessarily. The U.S. Sixth Circuit Court of Appeals recently ruled that switching where an employee’s contributions were coming from did not invoke the employer’s notice requirements, since the terms or conditions of coverage had not changed when the employer changed the contribution method.
The case arose after a a Steak ‘n Shake employee sued her employer, claiming they failed to notify her of her right to continue health coverage under COBRA after her insurance was terminated. The employee was injured at work and began receiving workers’ compensation benefits. While on leave, her health insurance contributions were deducted from her workers’ compensation payments rather than her normal paycheck. She failed to return to work after her workers’ comp benefits ran out, unable to pay her premiums, and her health insurance was cancelled. She was also terminated.
The Sixth Circuit held that the employee did not “cease to be covered under the same terms and conditions” when her contribution method was altered, so there was no loss of coverage that would have triggered a mandatory COBRA notice.
If you’ve been following the news you probably caught wind of the General Motors auto workers strike, and how GM stopped paying for health care coverage for striking workers. Is that legal? As it turns out yes, even when the workers are union members.
GM’s plan falls under ERISA, so as long as the notice requirement was met, the workers would need to move to union-paid COBRA plans to continue their health care benefits. “We understand strikes are difficult and disruptive to families,” GM said, regarding the cancellation. “While on strike, some benefits shift to being funded by the union’s strike fund, and in this case hourly employees are eligible for union-paid COBRA so their health care benefits can continue.”
If you have questions about your coverage requirements under the Affordable Care Act, notice requirements under ERISA, and whether you can change cancel healthcare coverage for your employees, talk to an experienced employment attorney for answers.