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Benefit Mandates and Plan Rules

Why Employers Care

Government mandates that require coverage of specific benefits (e.g. mental health services) or place restrictions on plan design (e.g. require that any willing providers be included in a physician network) raise health care costs, reduce flexibility in plan design, may impede efforts to improve quality and safety and may increase the instances of unnecessary and unproven care.

The federal government has mandated a number of coverage requirements including maternity care, etc. and Congress passed and the President signed a law mandating that if employers offer mental health benefits to their employees then these benefits must be equal or greater to traditional health benefits. While employer plans must comply with these federal mandates, the Employee Retirement Income Security Act (ERISA) generally exempts self-funded employer plans from state healthcare coverage mandates. However, ERISA generally does not exempt insurers and insured plans from state healthcare mandates.

The Patient Protection and Affordable Care Act (Affordable Care Act) includes a provision that grandfathers some existing plans from some employer mandates included in the law. However, grandfathered plans must comply with some plan mandates including: covering dependents through age 26, providing locations and reasonable break times for nursing mothers, having no annual or lifetime dollar limits on overall benefits, and covering children with pre-existing conditions up to age 19 starting in 2011. Non-grandfathered plans must comply with even more employer mandates, including covering government recommended preventive services with no cost sharing. Beginning in 2014, employers could face a "free-rider assessment" for certain "full-time" employees who do not have access to government-defined "affordable and comprehensive" coverage. In addition employers can have no annual or lifetime limits on essential health benefits, cannot have waiting periods of over 90 days and must cover adults with pre-existing conditions.

States and municipalities have proposed (and a few have enacted) laws that would require employers to either offer healthcare coverage to their employees or pay taxes. A Vermont law would establish a single-payer health care system and would raise revenues by increasing the current "employer assessment" for those employers who have employees who are ineligible to participate in their health plan and employees who refuse to participate in the health plan. The Secretary of the U.S. Department of Health and Human Services would have to grant Vermont a waiver in order to implement the program.

Some states, such as Massachusetts, have tied this so-called 'pay-or-play' mandate to broader healthcare reform. Other states, such as Maryland, have simply enacted employer coverage mandates alone. Federal courts ruled that Maryland's law violates ERISA and struck it down. The Ninth U.S. Circuit Court of Appeals ruled that the city of San Francisco's health care ordinance (universal health care plan), which includes an employer mandate, does not violate ERISA. In June of 2010, the Supreme Court denied a review of San Francisco's employer Health Coverage Ordinance.

Recently, Michigan passed a law requiring both insured and self-insured plans to pay a quarterly 1% tax on paid claims for health care services. The law is being challenged in federal court, under ERISA preemption.

What Can Employers Do?

Members of the National Business Group on Health can also voice their concerns to the Business Group's public policy team and by responding to public policy opportunities to comment on proposed regulations, contact Congress and/or the Administration, testify, or participate in related activities.

Relevant Tools and Resources Include:

Page last updated: January 29, 2014

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