Benefits promised, never received

[Guest rrdennis06]

I began working for a small law firm June 2005 and was promised benefits after 90 days. The firm doesn't have a group plan and each individual needs to get benefits on their own. Well, being that I had surgery 3 years ago no insurance plan would pick me up. I explained this to the firm and they said they'd look into a group plan. Well, fast forward 20 months. I'm still without benefits and everyone here has been given benefits except me. I don't think this is fair. They told me that going to a group plan is just way too expensive and right now they can't afford it. Is it legal to provide everyone in the company benefits, except 1 employee? I don't want to jump and say it's discrimination, however, I don't feel it's fair. Any advice on this issue would be greatly appreciated as we have no HR person in the firm for me to go to. I've come to the realization I may be working for a shady firm.

[QDROphile]

You have the same deal as everyone else. Get your insurance and the firm will pick up the portion of the cost that it has agreed to pick up. The firm is under no obligation to solve your insurability problems.

[J Simmons]

Is the firm refusing to make good with you what it promised as an inducement to you to take the job?

The firm may not have a group health policy from an insurer, but its reimbursement of more than one other employee of part (or all) of the premiums for individual insurance policies may, when considered together, amount to a 'group health plan' and be subject to HIPAA nondiscrimination requirements--that might be your hook. If that angle vets out, then the firm may be responsible to you for your health expenses not covered due to the lack of coverage. Unless carefully navigated, the firm might be violating several federal and perhaps state laws via its providing benefits using individual health policies.

[Don Levit]

J Simmons:

You are correct that the firm may have offered a group plan using individual policies.

How may the firm carefully navigate this area, so as to not violate laws using individual health policies?

What acts taken may have violated the laws using individual policies?

Don Levit

[david rigby]

....meanwhile, consider the possibility of looking for another job.

[leevena]

I would like to respectfully disagree with the concept that this could be group insurance. If the employer is offering individual plans as stated, and not a "group plan" as defined by their state, then it is not a group plan.

Rrdennis06 stated that "The firm doesn't have a group plan and each individual needs to get benefits on their own." I am assuming that the employer is providing some level of $ reimbursement to the employees for the coverage that THE EMPLOYEE SECURED. If this is true, then the employer is not "discriminating" agains rrdennis06 because the employer has not "given benefits", rather, they are reimbursing employees who have went out and got their own medical plan. You may, and I am not an attorney, but you may have an issue with the other employees being given $ for their plans and not you. But again, I have no idea.

Just because an employer promises to look into a group plan, does not require that employer to actually implement one for the employees. Company sponsored benefits are completely optional to the employer.

One more thing. I don't know where you live, but I would venture a guess that your state does have programs available that you were unaware of, such as a high risk pool. You may want to do some checking on what options are available. The employer and private (individual) markets are not the only source of coverage.

[J Simmons]

J Simmons:

You are correct that the firm may have offered a group plan using individual policies.

How may the firm carefully navigate this area, so as to not violate laws using individual health policies?

What acts taken may have violated the laws using individual policies?

Don Levit

Don, if you want to contact me offline (jsimmons@ida.net), I'll provide you some more info re these questions. John

[Steelerfan]

Small law firms are notorious for this. The old "we don't currently offer a group health plan, but we're looking into it" bit!!! I worked for a guy who wouldn't even put me in the 401(k) plan, even though I knew the nondiscrimination rules would have virtually required it. Unfortunately employers can discriminate when it comes to health insurance. I am confused about the HIPAA non discrimination requirements referred to above. I thought an employer could discriminate with respect to insured health plans--assuming this could be construed as a group health plan. I understand that an employee can't be denied coverage for a preexisting condition, but since when can't an employee be excluded from participation in a fully insured group health plan that is offered to other employees as an employee benefit?

My best guess would have to be that the remedy in a case like this would be limited to breach of some implied covenant of good faith or other employment contract remedy. But who would sue there current employer for this. Do what I did--find a better job!

[Don Levit]

Steelerfan:

I am glad that you continually are looking for better jobs!

Fully insured plans do not have separate state discrimination requirements, because the federal government assumes the states are providing the legislation needed to ensure justice.

Of course, both fully insured and self insured plans must adhere to federal insurance laws.

According to the IRS in a paper entitled VEBA Update and Safe Harbor Rules, "All such benefits (medical and dental benefits, child care facilities, educational expenses, and vacation facilities) must be offered in equal amounts, under equal terms, eligibility requirements, and conditions, without regard to salary level, position, or ownership interest in the employer."

Don Levit

[J Simmons]

I am confused about the HIPAA non discrimination requirements referred to above. I thought an employer could discriminate with respect to insured health plans--assuming this could be construed as a group health plan. I understand that an employee can't be denied coverage for a preexisting condition, but since when can't an employee be excluded from participation in a fully insured group health plan that is offered to other employees as an employee benefit?

HIPAA doesn't just require coverage for pre-existing conditions under certain circumstances regarding those allowed to participate. HIPAA goes beyond that, to the issue of eligibility to participate. It prohibits group health plans from establishing

any rule for eligibility (including continued eligibility) of any individual to enroll for benefits under the terms of the plan or group health insurance coverage that discriminates based on any health factor that relates to that individual or a dependent of that individual.

DoL Reg §2590.702(b)(1)(i).

From the perspective of whether health insurance premiums will be tax-free, an employer can pick and choose who will and who will not be so covered. IRC §106(a). However, if the decision to exclude is based on a health factor, doing so will violate HIPAA, specifically ERISA §702.

If the OPoster was not provided the promised health coverage because of the health factor mentioned possibly driving the law firm's costs upwards, then there's prohibited HIPAA discrimination at play.

The law firm's involvement with the individual policies, including bearing part or all of the premium cost, could render those policies to be a 'group health plan' and thus subject to HIPAA's requirements.

[Steelerfan]

Well, I'm not looking now. but I know new employment isn't really an answer for most people.

VEBAs are subject to nondiscrimination requirements regarding eligibility--fully insured health plans are not VEBAs. I'm talking about fully insured health plans, not funded plans or self-insured plans.

J Simmons -- The rule you quoted prohibits discrimination against otherwise eligible participants based on health factors, it does not prevent rules of eligibility that exclude participation based on other legitimate factors. The rule you mentioned assumes the person is otherwise eligible to enroll in the plan. It would seem obvious post HIPAA that an employer could not deny eligibility to someone solely based on health factors, but the law firm never denied coverage based on the OPoster's health condition. Everyone is told they must get their own coverage, regardless of their health condition. Assuming arguendo the firm is running a group health plan, which is a stretch, OPoster has no coverage as a result of his own inability to pick up coverage. He is not being prevented from enrolling by any rule for eligibility based on health factors, or any other action of the employer.

If I say, as an employer, that employees with blue hair can't be in my plan, then they can't be in the plan whether they are healthy or have cancer. If an employer operates a plan that excludes part-time employees, that is fine as long as the plan's eligibility rules are properly set forth. The HIPAA rule would seem to be of little help to someone who had a medical condition or a recent surgery but also happened to be a part time employee. Good luck trying to prove the employer based it's decision on a health factor if you are not otherwise eligible to participate in a plan of the employer, let alone if the employer doesn't even have a plan! The employer would have to go out of its way to say something like, "oh and by the way, you can't be in the plan not just because you're part time but also because you just had open heart surgery." Let's face it, small law firms might be a little sleazy but they aren't stupid enought to create fodder for a HIPAA discrimination claim.

There is no federal or state law requiring an employer who sponsors a fully insured group health plan to cover all employees--the nondiscrimination rules for insured health plans were repealed years ago. An employer is permitted to deny participation to entire classes of employees or even just one employee. Typically only part-time employees are excluded, but an employer could legally limit participation in a group health plan to its executive officers if it wanted to.

[Don Levit]

Steelerfan:

According to which federal law could an employer restrict qualified group health coverage to executives only?

Don Levit

[Steelerfan]

Steelerfan:

According to which federal law could an employer restrict qualified group health coverage to executives only?

Don Levit

The lack of a federal law requiring nondiscrimination in providing fully insured health benefits-the essential equivalent of a 410(b) or ERISA coverage requirement for health plans. An employer could do this and never even tell other employees about it. Employers can also provide for additiional medical reimbursents for executives, albeit with tax consequences.

To prevail in a case like OPosters, it seems that two very big hurdles would have to be overcome (1) convince a court that the plan is a group health plan and (2) further convince the court that the requirement to obtain coverage on one's own amounts to a defacto eligibility requirement based on health factors. That's the case that would have to be made I think. If the client can pay by the hour I'd take the case.

[J Simmons]

Steelerfan:

According to which federal law could an employer restrict qualified group health coverage to executives only?

Don Levit

Don, IRC sec 106(a) provides that

gross income of an employee does not include employer-provided coverage under an accident or health plan

except as otherwise provided in IRC sec 106. While certain LTC insurance premiums and other items are addressed in IRC sec 106(b)-(e), there's simply no discrimination requirement for this exclusion from taxable income.

Steelerfan is correct that an employer could pay such premiums for just executives, and it would be tax-free to the executives per IRC sec 106(a).

You might have to look far and wide to find an insurer willing to issue a 'group policy' to a subset as small as executives-only would likely be of the entire employee population.

Steelerfan: As the employer the law firm is responsible for the frailties of the 'plan' that it sets up. That plan is to reimburse employees for individual health coverages each arranges. The employer is paying for health coverage. There's no indication in the OP that this is limited in some way that excludes OPoster by definition that is not health-factor related (i.e., executive only, full-time only, etc). The OPoster explains inability to participate as due to the health factor. If the law firm leaves it up to the employee to acquire individual policies and then reimburse them, but the OPoster cannot because of health factors, the net effect of the employer's group health plan is excluding someone because of a health factor.

Hurdles? Yes, but I'd want to know what e-mail the OPoster might have tucked away on the topic and what a former co-worker might have to say before turning the OPoster away as a client.

[Don Levit]

John:

Assuming the plan is a group plan, which the TX DOI would say it is, according to its interpretation of federal law, could the employer provide an "average amount" of dollars, either for a medical plan, or for medical expenses to the OPoster?

Under this scenario, would it be discriminatory?

Also, your point about insurers accepting the group is well taken.

Steelerfan:

The reason there are no federal requirements for discrimination in fully insured plans, is because the federal government assumes the states will take care of this issue.

Apparently, the issue is important enough for the federal government to pass discrimination for self insured plans, because without these laws, the plans could discriminate as much as they want.

These laws would seem to serve as guidelines for federal laws, in that federal laws do not typically regulate insurers.

Don Levit

[J Simmons]

Don,

Your question poses an interesting question. HIPAA nondiscrimination does not allow the ER to charge more of the premium to those with adverse health factors than is required of those without such adverse health factors. Suppose that ER has just EEs A and B in addition to OPoster. A's health premium is $325 a month, and B's $270 per month. The ER reimburses A and B each 100% of those premium costs. OPoster obtains an individual policy at a cost of $1,125 a month. ER decides to reimburse OPoster $325--the most paid in dollars for A or B, the other EEs. Seems equitable, but that's just from the perspective of the ER and just from a dollars perspective. The ER doing so requires A and B bear none of the cost of their health insurance, but requires OPoster to bear the cost of more than 70% of OPoster's health coverage. If the ER's involvement and bearing the cost, or part of it in the case of the OPoster, causes the arrangement to be a group health plan for HIPAA purposes, it would be discriminatory. See DoL Reg sec 2590.702©(1)(i) and (f)(3), Example 2.

Your scenario is however slightly different. It is in the vein of an HRA funded by the ER to a dollar amount per EE that the EE might be able to choose to apply towards health premiums or reimbursement of out-of-pocket medical expenses. If the EEs could only apply these dollars to health premiums--it would be an arrangement for tax purposes governed by IRC sec 106--and you'd be in the situation described in the preceding paragraph. But here the EEs may choose reimbursement instead. This is, for tax purposes, governed by IRC sec 105(h). The choice of reimbursement rather than premium payments might be the saving grace for your scenario from the HIPAA nondiscrimination violation. Because the choice might result in some EEs having no premiums paid, but could if they chose to so apply it, it would seem that the ER is not dictating premium payments, which it cannot do discriminatorily based on adverse health factors.

[Steelerfan]

The ability to discriminate re health plans comes from the fact that neither the Code nor ERISA requires that a certain group of employees be covered if an employer chooses to maintain a health plan. It would seem silly to leave this to the states considering ERISA's broad preemption clause, but you'd have to check with the legislative history and the old timers that were around in early 70's as to what the reasons were, if there were any good reasons.

It would seem logical that the economic realities of fully insured policies would negate the need for a coverage requirement (as stated earlier, it is not economical to cover small groups), rather than reliance on state regulation of the insurance industry. Except for a very brief period of time when the Code required nondicrimination testing for insured health plans, there has never been a coverage requirement. The IRS decided it was unworkable. Incidentally, an employer can discriminate with respect to self-insured plans--it's just that the EE can't get the exclusion from income. You would find that some companies have an "executive medical reimbursement plan", which provides discriminatory taxable benefits to executives. As of yet Congress has been unwilling to flat out require nondiscrimination in the provision of health benefits, excpet for funded benefits such as VEBAs.

To me this is all just part the larger policy considerations surrounding the health care crisis. I'm not making any value judgements in my posts as to what is right or economically feasible--only what the law will let you do. Clearly the OP describes a situation where the employer does not intent to create a "plan" per se, but may possibly have done enough to get itself on the hook. But enforcement is always the issue. Forcing a small employer into unintended coverage costs could close up the shop.

[Don Levit]

Steelerfan:

The states are not preempted by ERISA from passing laws that regulate insurance, as long as the laws are not inconsistent with ERISA.

For example, MA law, under the MA Health Care Reform Act, states that insurers are prohibited from issuing most types of group health insurance policies, unless the employer mets certain non-discrimination requirements. In particular, the employer must make the coverage available to all full time employees and may not contribute more toward the cost of coverage for more highly paid employees.

Is this law preempted by ERISA?

Don't you think, most, if not all states, have similar legislation?

By the way, what states allow for insurers to discriminate for highly compensated employees for health benefits in qualified plans?

How about this, as a shocker: A plan which reimburses employees for premiums paid under an insured plan does not have to satisfy nondiscrimination requirements.

Does this mean that if the employee in this post secures a plan for $1,000 a month, the employer would only need to pay what he pays for the highest premium policy?

Don Levit

[Steelerfan]

Don--I agree that if a mandatory coverage law were a valid state regulation of insurance that it would not be preempted. But I don't know the answer.

You lost me as to the rest of your post.

[leevena]

If I could add my 2 cents and hopefully end this. Steelerfan...you are out of luck. No matter what angle you take, there is no way to compel the employer to get you group health insurance. The best you may be able to do is to have them give you some amount of money that would have been given to you for the insurance, but I doubt if you could even do that. Sorry to be so blunt, but based on what you have told us, and the replies I have seen, your out of luck.

[Steelerfan]

If I could add my 2 cents and hopefully end this. Steelerfan...you are out of luck. No matter what angle you take, there is no way to compel the employer to get you group health insurance. The best you may be able to do is to have them give you some amount of money that would have been given to you for the insurance, but I doubt if you could even do that. Sorry to be so blunt, but based on what you have told us, and the replies I have seen, your out of luck.

All I ever said was there might be a viable legal argument. I've been in private practice and believe me, if there is an argument that can be made it will be made (wether its winner or not)

If you actually read my posts, you'd see I think the argument is weak and a suit would be impractical. And I never said that compelling the employer to provide group insurance would be the remedy--in fact I said the opposite above.

[leevena]

If I could add my 2 cents and hopefully end this. Steelerfan...you are out of luck. No matter what angle you take, there is no way to compel the employer to get you group health insurance. The best you may be able to do is to have them give you some amount of money that would have been given to you for the insurance, but I doubt if you could even do that. Sorry to be so blunt, but based on what you have told us, and the replies I have seen, your out of luck.

All I ever said was there might be a viable legal argument. I've been in private practice and believe me, if there is an argument that can be made it will be made (wether its winner or not)

If you actually read my posts, you'd see I think the argument is weak. Are you confusing me with someone else?

Oops! A million apologies Steelerfan. I thought you were the one posting the question and have now just realized my mistake.

[Steelerfan]

That's ok, I got a little short. Overall I agree with you, but nothing surprises me in litigation and judges do some wild stuff if they think they are doing justice.

[J Simmons]

rrdenis06,

You may want to take a look at Smith v. Wynfield Dev. Co., Inc., Slip Copy, 2007 WL 1654149, C.A.11 (Ga.) (June 08, 2007) (unpublished) and Hopper v. Standard Ins. Co., Slip Copy, 2007 WL 433366 (D.N.H.) (February 07, 2007).

These decisions might help you analyze your situation and what to do.