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What You Need to Know if You Administer a Group Benefit Plan  

By William F. Schaake, CIC, CRM, CLCS  © 2012

Due to the recent decision by the Supreme Court to uphold the many of the changes of the Affordable Care Act, employers need to know important mandates or face strict repercussions and/or penalties. There are several mandates that have already passed such as raising the dependent age to 26, eliminating pre-existing condition exclusions for minors, and banishing lifetime benefit caps.  These mandates greatly affected the way the carriers provide coverage, but what about the employer?  What are the mandates plan sponsors have to follow?  

There has been discussion and debates concerning the non-discrimination issues, or Section 105-h, which essentially prohibits employers for carving out high option plans to their rank and file and even more concerning–having an equal employer contribution level across the board.  Thus far, this has been postponed by the IRS until further notice, however plan sponsors still face a myriad of mandates and requirements which loom on the horizon.

The first major change since the Supreme Court decision is the requirement for employers to provide a Summary of Benefit and Coverage (SBC) along with a Health Care Glossary to its employees.  This requirement commences on September 23, 2012 for new group and all groups renewing thereafter.

For the most part, the insurance carriers will bear most of the responsibility by preparing this document unless the plan sponsor offers a self insured program or is subject to prepare it own SBC’s.  However the employer is still responsible to notify their employees prior to any major change in the plan, provide all the SBCs for each plan offered on renewal & for new hires, and facilitate their employees with the accessibility of the summaries which includes an employee requests for the document.  If electronic means of communication is the preferred method of disseminating benefit information, then the employer is required to provide computer access to this information. See Summary of Benefit of Coverage for more information.

ERISA and HIPAA requirements are not eliminated and in fact will undoubtedly be more regulated and enforced. The privacy act requires employers to maintain confidential information in a manner to protect information on their employees from being fraudulently shared with wrongdoers. This includes the storage, sharing, and transmissions of information. Hence, no longer is it safe to send information containing social security number by standard e-mail.  

Some other mandates that are now required or will be shortly include:

Other requirements including COBRA administration, CHIPRA, TEFRA, etc. will be examined separately, however it is our opinion that administering group health insurance is becoming more onerous.   

Important Plan Sponsor Requirements - What Employers Need to Do to Comply

(Partial list in alphabetical order)

Age 26 Coverage for Young Adults

What plans are required to extend dependent coverage up to age 26?  Source:  US Department of Labor

The Affordable Care Act requires plans and issuers that offer dependent coverage to make the coverage available until a child reaches the age of 26. Both married and unmarried children qualify for this coverage. This rule applies to all plans in the individual market and to new employer plans. It also applies to existing employer plans unless the adult child has another offer of employer-based coverage (such as through his or her job). Beginning in 2014, children up to age 26 can stay on their parent's employer plan even if they have another offer of coverage through an employer.

Model Language of Notice for Opportunity to Enroll  

DOL FAQ’s - http://www.dol.gov/ebsa/faqs/faq-dependentcoverage.html

Children’s Health Insurance Program Reauthorization Act (“CHIPRA”) notice  Source: U.S. Department of Labor, March 2010

Under the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA), group health plans and group health insurance issuers must offer new special enrollment opportunities. Effective April 1, 2009, plans and issuers must permit employees and dependents who are eligible for, but not enrolled in, a group health plan to enroll in the plan upon:


The employee or dependent must request coverage within 60 days of being terminated from Medicaid or CHIP coverage or within 60 days of being determined to be eligible for premium assistance.

There are also new notice and disclosure requirements associated with CHIPRA.  Read More >>

Continuation of Health Coverage — COBRA  Source:  US Department of Labor as of February 16, 2011

The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102 percent of the cost to the plan.

COBRA generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

COBRA outlines how employees and family members may elect continuation coverage. It also requires employers and plans to provide notice.

For more information on COBRA Requirements: 

NYS Continuation of Coverage  Source:  New York State Department of Financial Services

Continuation Coverage Extension to 36 Months

On July 29, 2009, Governor Paterson signed into law Chapter 236 of the Laws of 2009, which improves access to health insurance for New Yorkers by making state continuation coverage (“mini-COBRA”) available for a total of 36 months.  Under the law, people eligible for federal COBRA or state continuation coverage may receive a total of 36 months of coverage.

Creditable Coverage  Source: CMS.gov  

The Medicare Modernization Act (MMA) requires entities (whose policies include prescription drug coverage) to notify Medicare eligible policyholders whether their prescription drug coverage is creditable coverage, which means that the coverage is expected to pay on average as much as the standard Medicare prescription drug coverage. For these entities, there are two disclosure requirements:

This page provides guidance documents relating to Creditable Coverage requirements for employer and union-sponsored plans and model notice documents.

CMS.gov:  More Information on Medicare D Credible Coverage and Employers Responsibilities

United Healthcare:  Medicare D Credible Coverage Frequently Asked Questions

Modal Notice Letters

Family and Medical Leave Act   Source:  U.S. Department of Labor  http://www.dol.gov/whd/fmla/


The FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. Eligible employees are entitled to:

For more information from DOL including forms, posters, and tools go to:  http://www.dol.gov/whd/fmla/

Involuntary Loss of Coverage Source:  U.S. Department of Labor  http://www.dol.gov/ebsa/publications/caghp.html

Ensure that the plan's special enrollment provisions permit individuals to enroll when a loss of eligibility for other group health plan or health insurance coverage occurs and when employer contributions toward other coverage cease

Example: A group health plan allows individuals to enroll through special enrollment for loss of other coverage only if the loss was due to an involuntary termination of employment.

Tip: The plan is required to permit individuals who declined health coverage under the plan because they had other group health plan or health insurance coverage to enroll in the plan through special enrollment upon any loss of eligibility for the other coverage or if employer contributions toward the other coverage cease.

Under HIPAA, individuals who are otherwise eligible, but had declined health coverage because they had other group health plan or health insurance coverage, must be permitted to enroll in the plan (regardless of any late enrollment provisions) upon loss of eligibility for the other coverage or if employer contributions toward the other coverage cease.

Loss of eligibility includes loss of coverage due to legal separation, divorce, voluntary or involuntary termination of employment, reduction in hours, children's aging out of coverage, or moving out of an HMO service area. It does not include loss of coverage due to a failure of the individual to pay premiums on a timely basis or termination of coverage for cause.

Under HIPAA, special enrollment rights are also triggered when employer contributions toward an individual's other coverage cease, regardless of whether the individual is still eligible for coverage under the other plan.

Qualifying Event - Special Enrollment Period  Source:  U.S. Department of Labor  http://www.dol.gov/ebsa/publications/caghp.html

A plan's special enrollment provisions must also permit employees and dependents (who are otherwise eligible) to enroll upon marriage, birth, adoption or placement for adoption

Example: A group health plan allows employees who are already enrolled for coverage to add dependents upon marriage, birth, adoption and placement for adoption. However, if an employee is not already enrolled, the plan does not permit any enrollment when these events occur.

Tip: HIPAA allows eligible employees and dependents to enroll upon marriage, birth, adoption or placement for adoption.

Group health plans are required to offer special enrollment to otherwise eligible employees, spouses and any new dependents upon marriage, birth, adoption or placement for adoption. Accordingly, an employee who is otherwise eligible, but not enrolled for coverage, can enroll (and can also enroll a spouse and any new dependents, if they are otherwise eligible under the plan) when any of these events occur.

The plan should amend its special enrollment provisions to allow employees and dependents who are otherwise eligible to enroll upon these events.

For individuals who enroll through special enrollment, ensure that the effective date of coverage complies with HIPAA

Example: After an individual enrolls through special enrollment, a group health plan makes coverage effective on the first day of the first calendar month following the date a completed request for enrollment is received.


Tip: HIPAA sets forth specific dates when coverage is required to be made effective for special enrollees. In this case, the plan is not making coverage effective early enough for some individuals.


For special enrollment upon birth, adoption or placement for adoption, group health plans are required to make coverage effective as of the date of the birth, adoption or placement for adoption. For these events, this plan, in this example, is not making coverage effective early enough. Therefore, the plan should change the effective date of coverage provision to comply with HIPAA.

On the other hand, for special enrollment upon loss of eligibility for other coverage, upon loss of employer contributions toward other coverage, or upon marriage, coverage is required to be made effective no later than the first day of the first calendar month following the date a completed request for enrollment is received. Therefore, the plan's effective date of coverage provision is permissible with respect to these special enrollment events.

Summary of Benefits and Coverage (SBC)  Source:  Healthcare.gov

As directed by the Affordable Care Act, health insurance companies and group health plans will soon provide consumers with a concise document detailing, in plain language, simple and consistent information about health plan or individual insurance policy benefits and coverage. The SBC will help consumers better understand the coverage they have and allow them to easily compare different coverage options. It will summarize the key features of the plan or coverage, such as the covered benefits, cost-sharing provisions, and coverage limitations and exceptions. The SBC will be available to consumers at important points in the enrollment process, such as when they are shopping for coverage, when they apply for coverage, at each new plan year, and at any time upon request.

The SBC will include a new, standardized health plan comparison tool for consumers known as “coverage examples” – using a format modeled on the Nutrition Facts label required for packaged foods. The coverage examples will illustrate, for comparison purposes, what proportion of the cost of care a health insurance policy or plan would cover for a sample patient for two common medical situations—having a baby and managing type 2 diabetes. Additional scenarios will be added in the future as feedback is gathered from consumers. These examples will help consumers understand and compare a sample patient’s share of the costs of care under a particular plan and have a better idea of how valuable the health plan will be at times when they may need the coverage.

The SBC will make it easier for health insurance consumers to find the best coverage for themselves and their families – and for employers to find the best coverage for their business and their employees.

Uniform Glossary of Health-Coverage and Medical Terms

Consumers will also have a new resource to help them understand some of the most common, and sometimes confusing, language used in health insurance documents. Health insurance companies and group health plans will be required to make available a uniform glossary of health-coverage and medical terms commonly used in those documents, such as “deductible” and “co-pay”. To help ensure the document is easily accessible for consumers, the Departments of Health and Human Services and Labor will also post the glossary on www.HealthCare.gov, www.cciio.cms.gov, and www.askebsa.dol.gov/.

Accessing this Information

Starting on September 23, 2012, health insurers and group health plans will begin providing the summary of benefits and coverage and the uniform glossary to consumers. Insurers and group health plans will provide:

Use of Information Technology and Reducing Burden on Employers and Insurers

These final rules seek to provide flexibility to plans and insurers while addressing the information needs of consumers. Assuming certain consumer safeguards are met, the final rule ensures that in the vast majority of cases, the SBC can be provided electronically, allowing a plan or issuer to post the SBC on its website or provide it by email. Electronic disclosure is expected to reduce costs while consumer safeguards are designed to ensure actual receipt by individuals. Additionally, the final rule provides flexibility in the instructions for completing the SBC in recognition of unique plan designs.

To view the final template for the summary of benefits and coverage, visit:


Waiting Periods  Source:  U.S. Department of Labor  http://www.dol.gov/ebsa/publications/caghp.html

If the plan has a waiting period for coverage, ensure that any pre-existing condition exclusion period runs concurrently with the waiting period, rather than beginning after the waiting period ends

Example: A group health plan imposes a 30-day waiting period from an individual's date of hire before coverage will become effective. Then, after an individual has satisfied this waiting period, the plan imposes a 12-month pre-existing condition exclusion from the individual's effective date of coverage (offset by creditable coverage).

Tip: The pre-existing condition exclusion period is required to begin on the first day of the waiting period.

HIPAA requires that the maximum pre-existing condition exclusion period begin on an individual's enrollment date. For plans that impose a waiting period, the enrollment date is generally the first day of the waiting period. (Under HIPAA, an individual's enrollment date is the first day of coverage or, if there is a waiting period, the first day of the waiting period.)

In this example, the plan must begin counting the 12-month pre-existing condition exclusion period from the individual's enrollment date, which in this case is the first day of the waiting period.

Employer Resources

Understanding Your Fiduciary Responsibilities Under A Group Health Plan by DOL.gov

Employer Requirements


Federal Acts & Legislations

Employee Benefits Compliance Articles & Links

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