Some of our employer clients have asked: “Can an employer contribute different amounts towards employee medical insurance for different employees?” Employers often treat employees differently (for example not all employees earn the same wage). However, they don’t want to violate any discrimination laws. We are not attorneys and don’t give legal advice. We do understand the insurance company underwriting process and want to shed some light on this question.
“Employer contribution” is the insurance industry way of describing the amount an employer pays towards an employee’s medical insurance. If an employer offers a group health plan then California state law requires an employer to contribute a minimum amount towards the cost of the employees’ medical insurance. Insurance companies differ in the minimum contribution amount. They usually require an employer to pay 50 percent of the least expensive plan, or $100 per employee per month. For more information on this see our summary of the Rules for California Small Business Medical Insurance. You can also give us a call at BenefitsCafe.com 800-746-0045 and we can assist you with your group benefits.
HIPAA Nondiscrimination Requirements
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) mandates that an employer not discriminate because of pre-existing medical conditions. The U.S. Department of Labor (DOL) provides guidance for employers regarding different contribution amounts. The DOL describes HIPAA Nondiscrimination Requirements for group medical insurance and says that:
Distinctions among groups of similarly situated participants in a health plan must be based on bona-fide employment-based classifications consistent with the employer’s usual business practice. Distinctions cannot be based on any of the health factors noted earlier.
DOL also gives examples of “groups of similarly situated participants”.
For example, part-time and full-time employees, employees working in different geographic locations, and employees with different dates of hire or lengths of service can be treated as distinct groups of similarly situated individuals, with different eligibility provisions, different benefit restrictions, or different costs, provided the distinction is consistent with the employer’s usual business practice.
So, the objective classification can’t relate to a medical condition or to any protected class (e.g., race, religion, sexual orientation, gender, etc.) We have seen some employers define a class as executives vs. non-executives; front office vs. warehouse employees; salary vs. hourly employees, etc.
While the DOL’s HIPAA Nondiscrimination Requirements describes what is allowed by law, California medical insurance companies often only allow an employer to designate a single employer contribution amount on the master application for group medical insurance. The insurance companies are concerned that the employer contribute the minimum amount. In this case some employers identify the different classes of employees and contribution amounts in their employee handbook.
Again, we are not lawyers and do not give legal advice. If you want to offer different contributions for different classes of employees you should consult your attorney. We can assist you as your agent/broker on your California group medical insurance plan. Please give us a call at 800-746-0045.
These are benefit descriptions for some Anthem Blue Cross large group plans. Effective 1/1/2017
These benefit descriptions apply to companies with 101 FTEs and that are based in California. Anthem offers many other plans but this is a small sample of the large employer plans.
Classic HMO 30/40/500 per admission Rx Essential Formulary $5/$15/$30/$50 This benefit description applies to both Select and Traditional HMO networks.
Value HMO 30/40/500 per day Rx Essential Formulary $5/$15/$30/$50/30% Same benefits for both the Select and Traditional HMO Networks.
Classic PPO 1000/35/20 Rx Essential Formulary $5/$20/$30/$50/30% Anthem large group PPO $1000 deductible plan
Classic PPO 500/30/20 Rx Essential Formulary $5/$15/$30/$50/30% Anthem large group PPO $500 deductible plan
Classic PPO 750/30/20 Rx Essential Formulary $5/$20/$30/$50/30% Anthem large group PPO $750 deductible plan