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Employee contributions (voluntary) to health premiums of other employees


Guest marktitelbaum
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Kirk:

Good point.

My only comment is that, instead of discriminating due to health status, the employer is discriminating due to "affordability" status.

I have thought for a while that the laws are too focused on discrimination due to health, that the end result is to discourage the healthy and not so wealthy from participating in group plans.

Why not have the total premium for each employee be one that is negotiable?

Assuming the employer subsidy is the same, have the total benefits be in direct proportion to the total premiums.

VEBAs can be set up this way.

Don Levit

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Guest gdburns

Don

The issue is "group type" not "group".

While "group" applies to a group of employees, it does not mean that the "group of employees" can negotiate, buy or sponsor anything. It is the employer who negotiates, buys and sponsors. The employer is who has the eligible status. It is the employer whose status determines whether "Group" is available or "Small Group".

Group insurance is available to employer groups. Group type plans are available to associations, union etc and usually do not cover medical expenses.

In an earlier post you claimed to be quoting from the Kansas Insurance Code. Not seeing such wording before and wondering if had misunderstood and taken it out of context, I asked you for a cite or link. You responded by stating that "you can find this regulation in the Kansas Benefits Model Regulation, K.A.R. 40-4-34"

K.A.R 40-4-34 ( http://www.kslegislature.org/legsrv-kars/s...1D3E6690622FE1D ) reads differently than you state and seems to deal with COB, a different issue entirely:

40-4-34 Accident and health insurance;

coordination of benefits; guidelines. Sections

3 through 9, including appendices A and B of the

national association of insurance commissioners'

``group coordination of benefits model regula-

tion,'' January 1996 edition, are hereby adopted

by reference subject to the following exceptions:

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In the days when I had hair, and could read without a magnifying glass, the "group-type" plans to which Don Levit refers were called "franchise plans". They were hybrid policies - with a mix of individual and group features and which were not subject to all the very strict rules and regulations concerning individual policies (concerning renewability, pricing and the like) and which could be offered to certain types of groups (e.g., associations) without requiring the normal group participation and employer contribution.

As for discrimination, I am strongly in favor of allowing every employer as much flexibility as the employer can have. Unfortunately, there are a number of employment laws (federal and state and municipality) which limit some of the flexibility; and there are a number of (usually) reasonable insurance underwriting requirements which limit the employer in other directions.

Don, With respect to another aspect of your comments, I am not sure what you mean by "total premium for each employee be one that is negotiable".

If you are suggesting having an employee's premium rate individually adjusted to provide for exactly that person's benefits, plus expenses of handling the benefits (marketing, administration, taxes, etc.), this could be done theoretically. However, it would mean that the individual who becommes ill and uses a lot of medical services and supplies, would have to pay an extraordinary amount, while all those (the vast majority of employees) who had no claims (or very small claims) would pay a small amount on their own behalf. [imagine a fire insurance option which, for the nominal sum of $5 per year, will allow you to receive an insurance policy for your house which will allow you to reimburse yourself for the value of the house and contents lost in a fire?]

Alternatively, if you are suggesting where the employer has an average rate per employee which is needed to cover all expenses and benefits, in total, then each employee can negotiate, with the employer, how much he or she will pay, below, equal to, or above the average, how could that work? Which employee, knowing the average, would agree to pay more?

However, if you are suggesting the employer set up a tiered plan, where employees can choose the benefits of any one of the tiers and pay its corresponding premium, then this is something which is available currently and in practice.

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gdburns:

I agree with you that it is the employer who negotiates, not the employees.

How do you understand that group-type programs do not apply to single employers? Yes, it is used (or was used) primarily with associations, franchise, or blanket coverage. And, it certainly can be used for medical benefits. I have not seen in any of the state insurance codes that group-type insurance does not apply to single employers. In fact in several of the codes, this term is referred to as group OR group-type plans.

The main point I am trying to make is that these plans can be structured differently, for one of the key components is that the plans are generally not available to the public.

Seems like a ripe invitation for fully insured and self insured plan sponsors to put on their thinking caps.

Don Levit

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Larry M:

I am suggesting a combination of plans 2 and 3 regarding "negotiable" premiums.

We know with each employee having the same premium for group insurance for the same benefits, that if an employee (and employer ) pay that premium, they have the full benefits.

By paying half the premium, they have half the benefits.

In this way, employees can more tailor their coverage to their needs and their pocketbooks.

I mentioned that the VEBA does allow for premiums and coverage to vary in this type of fashion.

Don Levit

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Guest gdburns

A VEBA cannot and does not allow anything. A VEBA is really a funds holding mechanism. It does not determine premium structure, in fact it has no relevance to either the premium structure, the benefits offered or the scope of coverage.

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gdburns:

A VEBA is a tax-exempt entity created to fund various benefits, one oif which is medical benefits.

A VEBA may be established by an employer or through collective bargaining.

As I mentioned, one of the unique qualities of a VEBA is that benefits can vary by contributions made.

In reg. 1.501©(9)-2(a) it states, the allowance of different benefits based solely on differences in contributions is permitted, provided that those making equal contributions are entitled to comparable benefits.

Don Levit

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Folks:

Here is an interesting bit of information I just came across regarding "discrimination" in retirement plan contributions for employees. I wonder if this may be applicable to medical plan contributions for employees.

It describes "burdensome contributions" for retirement plans.

In code section 401, under (g) (all I have, at this point), it states, Sec. 1.401-3(d) of the regulations provides in part, If a contributory plan is offered to all of the employees, but the contributions required of the employees are so burdensopme as to make the plan acceptable only to the highly paid employees, the classification will be considered discriminatoryin favor of such highly paid employees. As a general rule, however, employee contributions of 6% or less are not deemed to be burdensome.

Assume the employer provides contributions in equal amounts to all employees for medical benefits.

Assume also that some employees will have to pay more than 6% of their compensation to pay the balance of the premium.

Is this plan discriminatory?

Don Levit

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Guest gdburns

That is exactly the point ... it is used "to fund various benefits" not to negotiate, provide etc etc. It is used to fund whatever the employer decided to buy and to provide. It serves to make sure that the funds are available when needed and protected until such time.

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