Employee percentage of premium

[Guest June]

Until this year, my employer (less than 15 employees) paid our health insurance premiums in full. This is covered in our employee manual & was understood by all to be a part of our compensation.

This year premiums have risen to such an amount that he has decided that the employees will pay 25% of the monthly premium. Only 5 employees will be on the company plan; others are covered by their spouses plans - they are compensated for what they pay to be covered that way.

Since this is a small company, the insurance company required each employee who would be on the plan to submit a form giving health history, age, etc.

Individual rates were calculated, then the total being the monthly premium.

The individual rates are - from youngest to oldest:

$161.56

$277.48

$305.57

$744.61

$965.88

Total monthly premium $2455.10

Average of this would be $491.02

25% would be $122.75

The employer has decided that it is not fair to younger employees to pay 25% of the total monthly premium since their individual rates are lower.

So, each employee will be paying 25% of the individual rate determined by the insurance company.

Therefore employee portions of the premiums are:

$161.56 x 25% = $40.39

$277.48 x 25% = 69.37

$305.57 x 25% = 76.39

$744.61 x 25% = 186.15

$965.88 x 25% = $241.47

I have never heard of a company having employees pay different amount for their part of the premiums (except when spouse &/or family are added).

Is it lawful for employee premiums to be charged this way?

[QDROphile]

"Only 5 employees will be on the company plan; others are covered by their spouses plans - they are compensated for what they pay to be covered that way."

Add to your list of questions whether or not the employer has a section 125 plan with respect to the health benefits. The employees appear to have a choice between health coverage from the employer or cash (the amount the employer increases compensation to cover the incremental cost for benefits under the spouse's plan). Since on of the requirements of a section 125 plan is a written plan document, there may be trouble. But the answer to your articulated question could be affected by whether or not there is a section 125 that covers health beneits because section 125 plans have discrimination rules.

Subject to future changes under health care reform, there are no tax discrimination rules relating to insured health benefits (unless they sneak in indirerctly because the health plan is under a section 125 plan). An employer can cover all or some of the premium cost for an employee. That is simply a matter of compensation. No comment on individual rating.

[Guest June]

I found some interesting info here:

http://www.dol.gov/ebsa/faqs/faq_hipaa_ND.html

Can a health insurance issuer charge an employer different premiums for each individual within a group of similarly situated individuals based on each individual’s health status?

No. Issuers may not charge or quote an employer or group health plan separate rates that vary for individuals (commonly referred to as “list billing”), based on any of the health factors.

This does not prevent issuers from taking the health factors of each individual into account when establishing a blended, aggregate rate for providing coverage to the employment-based group overall. The issuer may then charge the employer (or plan) a higher overall rate, or a higher blended per-participant rate.

While HIPAA prohibits list billing based on health factors, it does not restrict communications between issuers and employers (or plans) regarding the factors considered in the rate calculations.

And, No, we do not have a 125 plan - no cafeteria plans here.

[GMK]

Looks like your answer under HIPAA is that the premium for each of the 5 employees is $491.02.

How much the employer reimburses of that amount to each employee is up to the employer, as QDROphile said.

Although it doesn't matter what I would do, I would reimburse the same amount to each employee, regardless of the individual risks. Insurance is meant to be shared risk. Everyone pays the same. Then, if you need it, you're covered, but if you're lucky (in terms of not having serious health problems), you don't get a reduced premium. If the whole group is healthy, then the average premium should drop, because it's a group plan, not an individual policy.

[masteff]

From the table you provided, your rates are based on age. Age is not a health factor. Age based rating is not uncommon, especially in small plans.

You might find this educational: http://nahu.org/consumer/GroupInsurance.cfm

[Chaz]

You are going to have to look at your state's insurance law to see the extent to which insurers can use medical underwriting to determine your group rates.