Discrimination

[Guest Steve Pellston]

I’m searching for the federal regulations that explain health insurance discrimination. For example, can an employer establish separate classes of employees and provide one class with health insurance and not the other? I think this is more of a discrimination issue but is it covered by ERISA or the IRS? If it is a discrimination issue where is it addressed?

Steve

[Guest Hillary P]

It may depend on what you mean by "classes" of employees. For example, an employer couldn't discriminate in the provision of health care benefits on the basis of a particular employee status (e.g., race, sex, age, disability) that is protected by one of the federal civil rights laws. But I suspect you're not talking about blatant discrimination of that type.

If you're referring to an employer classifying employees in certain other ways, such as part-time v. full-time or some other job classification, and providing or not providing health coverage on that basis, I'm not aware of any federal regulations that would prohibit it. (State law might be a different matter.) Because ERISA doesn't require companies to offer health care at all, I think it leaves employers a pretty free hand to divvy up benefits they offer as they see fit. I also don't know that any tax regulations would address the situation, although someone with more in-depth knowledge of the Internal Revenue Code can probably give you a better answer.

[Brigid Anderson]

In addition to the laws Hilary mentions in her post, the Code imposes discrimination testing requirements--to prevent discrimination in favor of highly compensated employees--as a condition of favorable tax treatment for certain plans and benefits including DCAPs (§ 129), group term life (§ 79), self-insured medical reimbursement plans (§ 105(h)), benefits provided through a VEBA (§ 501©(9) and 505(B)), and cafeteria plans (§ 125)(although a cafeteria plan is not, by itself, an ERISA plan). HIPAA prohibits discrimination on the basis of health status under group health plans. Our book ERISA Compliance for Health and Welfare Plans (EBIA 1992-1999) discusses eligibility restrictions under ERISA (mostly found in case law) in detail. Our book Cafeteria Plans (EBIA 1991-1999) addresses the tax side discrimination testing.Our book HIPAA Compliance for Group Health Plans (EBIA 1997-1999) discusses the HIPAA health status rules in detail.

[Note: This message has been edited by Brigid Anderson]