Care Needed When Revamping Employer Group Health Plans

August 22nd, 2011 by JBWK

A new study from the National Business Group on Health has found that, among large employers, more than half plan on raising their employees’ share of premium contributions in 2012 given escalating healthcare costs.

However, any employer that plans on raising employee contributions has to keep in mind the Affordable Care Act’s new requirement that fully insured group health plans not discriminate in favor of highly compensated employees, meaning that lower-paid employees must be eligible to receive the same benefits as highly compensated employees under the health plan. The problem: no one really knows what that means–including the IRS. With steep penalties for violation, the IRS has delayed enforcement of penalties for discriminatory, fully insured group health plans, seeking more guidance on how exactly those rules should operate.

One major issue still outstanding is whether employers may contribute more toward the premiums of highly compensated employees compared to nonhighly compensated employees. For example: can an employer pay all of its executive employees’ health insurance premiums but only half of lower-level employees’ premiums?

The overdue IRS guidance will hopefully clarify some of these questions; in the meantime, the only good news is that no one else knows what to do either.

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