Charging employees for individual health coverage - can it be done?

[Guest]

The organization I work for has had a long practice of paying 100% of the health insurance costs for the employee. Employees pay a portion of the premiums for dependent coverage. With the rising cost of health care, it has been suggested that we start to charge employees not only for dependent coverage but to cover themselves as well. Employees have begun to claim that they have a contract (nothing written) that they are to receive individual health coverage at no cost for ever and ever. Has anyone gone from not charging employees to charging them? What has been your experiences? Have you found any relavent laws/cases that prevent charging? Has anyone ever heard of an organization that can not charge for individuals for health coverage?

[KIP KRAUS]

For ever and ever is a long time. Is this a trick question, or does it just sound like one? Absent of a collective bargaining agreement, I don’t know of any laws that would prohibit an employer from increasing employee contributions to a medical plan. However, if they were ever given anything in writing that would suggest that they would never have a change in contributions I’d have an attorney look it over.

[Joe Priselac]

Sam,

I have been involved with many situations where the employer wishes to begin employee contributions. I'm no labor lawyer, but absent a collective bargaining agreement, the employer is free to change the company contribution after notifying the employees. This is one of the main reasons employers adopt a Section 125 plan. Obviously, the way you go about this has a huge impact on employee morale. Properly planned out, there are ways to "sugarcoat" the transition to employee contributions.

[jeanine]

Even a collective bargaining agreement doesn't last forever and ever! As long as you give adequate notice and implement the changes at the beginning of the plan year, or according to a new collective bargaining agreement, there's not much the employees can do. Why don't you start with a modest contribution? We went from $0 to $10 per month, then increased throughout the next few years. Or, you could increase the co-pays if that goes over any better.

[david rigby]

If the "organization" is a governmental one, there might be other issues involved.

[Guest]

Pax, Actually, I do work for a municipal government. Do you know where this has been an actual issue? Under what circumstances do other issues become involved? Thanks.

[KIP KRAUS]

Pax

Are you a psychic or what? I wouldn’t have thought of that since I never worked for a municipality. Please enlighten us with the pitfalls. I’d be interested to know what they are.

[Larry M]

(expanding upon the comment by pax:)

In some states, for some plans, for some government plans (how's that for specificity?), the courts have ruled there is an implied contract entered into upon employment which prevents an agency from reducing the benefits of employees hired prior to the date of change - unless the plan specifically provided for the change.

[Greg Judd]

Originally posted by Larry M

(expanding upon the comment by pax: )

In some states, for some plans, for some government plans (how's that for specificity?), the courts have ruled there is an implied contract entered into upon employment which prevents an agency from reducing the benefits of employees hired  prior to the date of change - unless the plan specifically provided for the change.

Uhh, lets see:

1) Figure the latest cost of the coverage.

2) Compare it with whatever your projections/latest notice of premium increases may be.

3) Then, the amount you may introduce contributions at/raise contributions to becomes the difference between former & upcoming cost.

4) Make changes at the appropriate date: start of your budget cycle, or the date your premium increase takes effect, or other appropriate start point.

Economics-challenged judicial "opinions" (read: delirium) aside, this is one way to demonstrate the organization has not reduced its commitment to 'maintaining' the benefit: it hasn't chosen to pay less for the benefits, and hasn't (necessarily) eliminated any items that might be paid for.

It's just my personal opinion, but I'd be inclined to move from any jurisdiction in which such legal eagles were elevated to the bench.

I'm starting to sound like a flack for Kaiser Family Foundation, but their free annual Employer Health Benefits survey does a great job of providing info useful when addressing questions like this: Click here for links to the survey & its components (Acrobat documents).