Limitations to ERISA Health Plans

[Guest Martha Kowalski]

A client refuses to purchase reinsurance protection but instead imposes a yearly plan payment limit on each employee. Does anyone know of federal laws or court rulings speaking to this type of exposure?

[GBurns]

I have never heard or seen any requirement that says that there has to be any reinsurance or stop loss insurance. That is why there are plans that are fully funded or fully self insured.

The question might better be whether or not the cap can be different for each employee or whether it must be by class? This should raise discrimination issues. How is the cap applied?

[KIP KRAUS]

I agree with GBurns. Federal legislation including ERISA does not address medical plan design or the financing thereof.

The discrimination issues GBurns points out should be considered.

[Jbentz]

I suggest you treat your client to a movie and go see "John Q".

[mroberts]

I would suggest purchasing reinsurance or stop loss coverage. What if one of our employees has a premature baby or cancer? Do you really want your employee coming out of pocket for $100,000? That would be devastating. How many employees do you have? Something tells me that your company is small and shouldn't be self-insured to begin with.

[Larry M]

Each employer (State of Hawaii excepted) has the right to determine how much money it wishes to spend for employee benefits and how it is to be spent.

What is "wrong" with a plan where the employer chooses to allocate a set amount of money each year for each employee as that employee's "medical savings plan"?

For example, the employer may establish a medical plan which reimburses each employee's medical expenses but no more than $1,000 per month - or $12,000 in a calendar year.

Here, the employER wishes to limit its financial exposure, and does so, even if it means getting involved in the reimbursement of every little medical expense claim.

On the plus side, it appears as if such a plan could get the employer out of any concerns with state (or federal) mandated coverages changing. [The dollar limit would apply to any medical expenses.]

The employEE can use his/her own resources to purchase specific excess coverage...or go bare and let the public take care of the portion of the costs which are unaffordable.

If the employer purchases the specific stop loss (or aggregate) coverage, it loses control of the amount of money it will be laying out in the future....all plans end up costing the employer the total of the benefits plus the expense of maintaining the plan [i know of very few - none, really - insurance firms which deliberately allow stop loss claims to continue to be higher than the premiums they charge to employers]. Therefore, the catastrophic claims, if covered by the plan will be a charge to teh employer - even if they are, initially, transferred to the stop loss carrier.