How ERISA Works With A Group Health Plan
The Employee Retirement Income Security Act (ERISA) is a federal law that sets minimum standards for most private industry, voluntarily established retirement and group health plans, including self-insured and fully insured plans.
ERISA also governs disability, group life, and dental plans as well as other fringe benefits. Congress first enacted the law in 1974, with several amendments since that time to address the changing needs of American workers and families.
ERISA is administered and enforced by the U.S. Department of Labor (DOL) Employee Benefits Security Administration, the Treasury Department’s Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation.
If you’re considering health insurance for your employees, there’s a high probability it will be subject to ERISA, although it does not apply to group health plans established or maintained by governmental entities, churches for their employees, or plans maintained solely to comply with workers’ compensation, unemployment, or disability laws. It also doesn’t apply to plans maintained outside the U.S. for the benefit of nonresident aliens.
Shopping for Coverage
When comparing health insurance options for your employees, there are many things to consider, such as coverage, plan type, cost, provider network(s), etc.
Whether you are interested in offering your employees coverage from a single insurance company or from multiple health plans through a public or private health insurance exchange, you will likely be able to choose from Health Maintenance Organization (HMO), Preferred Provider Organization (PPO), Exclusive Provider Organization (EPO), and other plans, including some with a Health Savings Account (HSA).
One of the advantages of selecting a private exchange is broader access to plans and provider networks, so your employees can find coverage that best fits their individual or family health care needs and budget. In addition, with the CaliforniaChoice private exchange, you can determine your own Defined Contribution toward employee premiums. For more information, read 5 Advantages That Make CaliforniaChoice Different.
All plans complying with the Affordable Care Act (ACA) offer coverage for 10 Essential Health Benefits. Read our related post, How to Get Group Health and What’s Covered, for details. ADD LINK TO OTHER POST FOR JUNE 2020
Under ERISA, employers are required to provide participants with information about how their plans operate; this is done through distribution of a Summary Plan Description (SPD) or Summary of Material Modification (SMM) and a Summary Annual Report (SAR). DOL reporting is required using Form 5500-SF (Annual Return/Report for Small Employer Benefits Plan for groups with fewer than 100 participants) or Form 5500 (Annual Return/Report of Employer Benefits Plan for group of 100 or more).
While many employers wrongly assume documents provided by an insurer for employees’ fully insured products fulfill the SPD requirements, in reality, employers must deliver a Summary Plan Description that complies with ERISA and DOL requirements. The SPD must describe provisions of the plan in easy-to-understand language, including:
- Cost-sharing information for the participant or beneficiary, such as premium, deductible, and co-insurance and co-payment amounts
- How preventive services are covered under the plan
- What drugs are covered under the plan
- What medical tests, devices, and procedures are covered
- Network provider information, including details on coverage outside of the plan’s network of providers
- Pre-authorization requirements, if any, and utilization review as a condition to obtaining a benefit or service under the plan
SPDs must be provided within 90 days of an employee becoming a plan participant, and within 60 days of a material change in coverage (including changes in premium, deductibles, co-insurance amounts, and co-payments – which can, alternatively, be communicated in an SMM, as described above). An SPD can be distributed electronically if the plan administrator ensures such distribution results in delivery to participants. If a participant, beneficiary, or other individual requests a paper version of the SPD, it must be provided in a timely manner.
More information on ERISA compliance requirements in connection with group health plans can be found on the Society for Human Resource Management (SHRM) website, or on the association’s HR Q&As page.
You can also get information from an employee benefits broker, including a customized quote for your employees. If you do not already have a broker, we’ll help you find one here.