No discrimination based on compensation
Benefits cannot be based on wages
The health care reform law notes that, effective September 23, 2010, plans may not discriminate in favor of highly compensated employees. This means that group health plans cannot base eligibility or the level of benefits on an employee's wage. The group can offer different levels of benefits as long as they comply with ERISA and are not tied to the amount an employee makes. The legislation defines a highly compensated employee is someone who is:
- One of the five highest paid officers.
- A shareholder who owns more than 10% in value of the employer's stock.
- Among the highest paid 25% of all employees (exceptions apply).
We do not believe we will need to change our approach to allowing groups to offer different waiting periods to different employee levels. The health care reform law "nondiscrimination by compensation" provision is specific to the benefit offerings of a medical plan and not the waiting periods established by a company.
Grandfathered vs. non-grandfathered plans
No matter how a plan is structured, in order for it to be a grandfathered plan, it must have been in effect when the health care reform law was passed on March 23, 2010, and no changes are made to the benefits or the benefit plan. For non-grandfathered plans, the plan sponsor of a group health plan (other than a self-insured plan) may not set up rules about health insurance coverage eligibility (including continued eligibility) for any full-time employees based on the total hourly or annual salary of the employees. Nor can the sponsor set up rules that in any way favor employees who receive more compensation.
Offering benefits only to currently eligible employees
A group can retain grandfathering status by continuing to offer benefits only to currently eligible employees (instead of all employees), as long as the benefits are not tied to how much those employees make. In addition, the health care reform law notes that the plan sponsor of a group health plan (other than a self-insured plan) may not set up rules about health insurance coverage eligibility (including continued eligibility) for any full-time employees based on the total hourly or annual salary of the employees. Nor can the sponsor set up rules that in any way favor employees who receive more compensation.
Because this health care reform law provision is specific to plans and not to benefits, executive physicals (and similar benefits) are not affected.
Getting to the bottom of your health care costs
Did you know: Health care fraud and abuse accounts for 3% of health care spending?
The National Health Care Anti-fraud Association estimates conservatively that 3% of all health care spending, or $68 billion, is lost to health care fraud each year - that's more than $180 million per day.