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The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law requiring those who establish and maintain group health insurance and Keogh plans to file annual reports with the Department of Labor and the IRS. These annual reports must detail documentation of the trust agreement, the method of investment, claim and benefit denials, enrollment forms, certificates of participation, annual statements, and administrative records.
ERISA's goal was to increase the rate of national participation in pension plans, prevent loss of benefits by persons who terminate employment before retirement, establish minimum standards for funding and vesting, and provide for the overall control of new and existing pension plans. While the law does not require an employer to establish a pension plan, if such a plan exists, it must conform to ERISA's provisions — which prescribe which employees must be included, establish minimum vesting requirements, specify contribution amounts, and set minimum funding requirements. In addition to the Secretary of Labor and the IRS, the plan must disclose information about its operation and financial condition to those covered under the plan and their beneficiaries. Numerous amendments over the years have expanded protection to plan participants and beneficiaries regarding retirement benefits and health coverage specifically promised to employees and their dependents.
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) requires any employer with 20 or more employees to extend group health coverage to terminated employees and their families after a qualifying event related to personal or professional changes.
Qualifying events include voluntary termination of employment, termination of employment for reasons other than gross misconduct (such as a company downsizing), and a change in employment status from full-time to part-time. For any of these qualifying events, coverage may be extended for up to 18 months. For other qualifying events, such as the death of the employee, divorce, or legal separation, the coverage period for dependents may be extended up to 36 months. The terminated employee must elect COBRA continuation within 60 days of separation from employment. The employer may charge a premium of no more than 102% of the group premium rate, with the extra 2% covering the employer's administrative costs.
COBRA benefits apply to group health insurance, not group life insurance. Unlike a conversion privilege, in which the individual converts to an individual health insurance policy, COBRA continues the same group coverage the employee had, and the employee pays the same group premium the employer paid (or that the employer and employee together paid, if the plan was contributory).
Under the Patient Protection and Affordable Care Act, coverage for children of the insured must extend until the adult child reaches age 26 (unless the child qualifies as a disabled dependent), and the same age limit applies to COBRA coverage for eligible children of the insured. In addition, if a dependent child loses dependent status under the group plan, the child qualifies for a maximum continuation period of 36 months.
Coverage for dependents under COBRA may be extended to 36 months in the event of the employee's divorce or death.
COBRA benefits may also be discontinued upon several disqualifying events, including failure to make a premium payment, becoming covered under another group plan, becoming eligible for Medicare, or the employer terminating all group health plans.
In California, there are two COBRA programs depending on the size of the company. Federal COBRA applies only to companies with 20 or more employees; a company with 2–19 employees instead falls under a state program called Cal-COBRA. Cal-COBRA is modeled after the federal program and is administered directly by the health insurance company. People enrolled in COBRA or Cal-COBRA are eligible for up to 36 months of continuation coverage.
Cal-COBRA requirements do not apply to individuals who are eligible for Medicare (even if only Medicare Part A), covered by another hospital, medical, or surgical plan (or another group plan), eligible for federal COBRA, covered or eligible under Chapter 6A of the Public Health Service Act, or who fail to submit the required premium.
Under the Family and Medical Leave Act of 1993 (FMLA), an eligible employee is entitled to a total of 12 workweeks of leave during any 12-month period for the birth of a child (and to care for the newborn within one year of birth), the placement of a child for adoption or foster care (within one year of placement), to care for a spouse, child, or parent with a serious health condition, because of the employee's own serious health condition that makes the employee unable to perform their job duties, or because of a qualifying need arising from the fact that the employee's spouse, child, or parent is a covered military member on covered active duty.
Except where the employee takes leave on an intermittent or reduced-leave schedule, an eligible employee who takes FMLA leave for its intended purpose is entitled, upon return from leave, to be restored to the position held when the leave began, or to an equivalent position with equivalent employment benefits, pay, and other terms and conditions of employment. Taking leave under FMLA cannot result in the loss of any employment benefit, such as group medical expense insurance, earned prior to the date the leave began.
The Americans with Disabilities Act (ADA) prohibits employers from rejecting job applicants with disabilities on the grounds that disabled employees will increase the cost of group health care benefits. The ADA also prohibits employers from rejecting applicants whose spouses, children, or dependents are disabled on the grounds that they would be covered by the group plan.
California's Fair Employment and Housing Act (FEHA) prohibits employers from discriminating against an employee who has become pregnant or who is requesting leave associated with pregnancy. Under the California Pregnancy Disability Leave Act (PDLL), employers are required to provide up to 4 months of leave for an employee whose disability is caused by pregnancy or a pregnancy-related condition.
The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) is a federal law requiring coverage parity for mental health benefits with benefits under the insured's medical/surgical coverage. These requirements apply to large group plans (more than 50 employees) that offer mental health benefits alongside medical/surgical benefits: deductibles, copayments, and treatment limitations for mental health benefits cannot be more restrictive than for any other medical benefit, and providers cannot impose separate cost-sharing requirements for mental health benefits. The Affordable Care Act enacted rules on how health insurance issuers carry out these requirements.
Legislation that took effect in July 1997 ensures portability of group insurance coverage and includes various required benefits affecting small employers, the self-employed, pregnant women, and the mentally ill. The Health Insurance Portability and Accountability Act (HIPAA) regulates protection for both group health plans (employers with 2 or more employees) and individual insurance policies sold by insurance companies.
HIPAA protections for group health plans include prohibiting discrimination against employees and dependents based on their health condition, and allowing opportunities to enroll in a new plan under special circumstances. HIPAA protections for individual policies include guaranteeing access to individual policies for qualifying individuals, and guaranteeing renewability of individual policies.
HIPAA includes regulations regarding eligibility for employer-sponsored group health plans. These plans cannot establish eligibility rules for enrollment that discriminate based on any health factor relating to an eligible individual or that individual's dependents. A health factor includes health status, medical condition (physical or mental), claims experience, receipt of health care, medical history, genetic information, disability, or evidence of insurability (including conditions arising from acts of domestic violence and participation in activities such as motorcycling, skiing, or snowmobiling). Employer-sponsored group health plans may apply waiting periods prior to enrollment, as long as they are applied uniformly to all participants.
To be eligible under HIPAA regulations to convert coverage from a group plan to an individual policy, an individual must have 18 months of continuous creditable health coverage, have been covered most recently under a group plan, have exhausted any COBRA or state continuation coverage, not be eligible for Medicare or Medicaid, not have any other health insurance, and apply for individual coverage within 63 days of losing prior coverage. HIPAA-eligible individuals meeting these criteria are guaranteed the right to purchase individual coverage.
If a new employee meets the applicable requirements, the employer must offer coverage on a guaranteed issue basis.
Under HIPAA, a pre-existing condition is a condition for which the employee has sought medical advice, diagnosis, or treatment within a specified period of time prior to the policy's issue.
The concept of creditable coverage means an insured must be given day-for-day credit for previous health coverage against the application of a pre-existing condition exclusion period when moving from one group health plan to another, or from a group health plan to an individual plan. Prior to the Affordable Care Act (ACA), individual insureds were entitled to receive credit for previous creditable coverage that occurred without a break of 63 or more consecutive days. The ACA has since prohibited pre-existing condition exclusions and eliminated waiting periods in excess of 90 days; it also eliminated the requirement to issue HIPAA group health plan certificates of creditable coverage.
At the plan sponsor's option, the issuer offering group health coverage must renew or continue the current coverage in force. However, group health coverage may be discontinued or nonrenewed for nonpayment of premium, fraud, violation of participation or contribution rules, discontinuation of that particular coverage, or the group moving outside the service area or ceasing association membership.