Protecting what matters most

Updated June 27, 2020

Frequently Asked Questions

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Click on the headings below to see frequently asked questions.

The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives employees and their families who lose coverage on an employer benefit plan, the right to continue their coverage for a certain period of time.

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for employee benefit plans maintained by private-sector employers. ERISA includes requirements for both retirement plans (for example, 401(k) plans) and welfare benefit plans (for example, group health plans).

Private-sector employers (regardless of size) that maintain welfare benefit plans for their employees

Government and church employers are exempt

Employee welfare benefit plans established by private-sector employers

Exemptions apply to certain payroll practices and voluntary plans

Certain welfare benefit plans that would otherwise fall under ERISA have been specifically exempted by DOL regulations. These exemptions include:
  • A safe harbor exemption for certain payroll practices
  • A safe harbor exemption for “voluntary plans.”

Payment of Wages
An employer’s payment of compensation for work performed by an employee, including compensation at a rate in excess of the normal rate of compensation for duties under other than ordinary circumstances, does not create an ERISA plan with respect to wages, overtime pay, shift premiums, holiday or weekend premiums.

Unfunded Sick Pay or Paid Medical Leave Programs
In addition, payment of an employee's normal compensation, out of the employer's general assets, on account of periods of time during which the employee is physically or mentally unable to perform his or her duties, or is otherwise absent for medical reasons (such as pregnancy, a physical examination or psychiatric treatment) is a payroll practice that is not subject to ERISA.

HIPAA is the acronym for the Health Insurance Portability and Accountability Act that was passed by Congress in 1996.

Sets limits and conditions on the uses and disclosures of protected health information (PHI) that can be made without an individual’s authorization;

Gives individuals rights over their PHI, including the right to receive a notice from covered entities regarding their privacy practices; and

Requires appropriate safeguards to protect the privacy of PHI.

The HIPAA Privacy Rule applies to covered entities and business associates.

A covered entity is a health plan, a health care clearinghouse or a health care provider that conducts certain transactions electronically.

In general, a business associate is an entity that performs a function, activity or specific service for a covered entity that involves PHI.

The extent of a plan sponsor’s obligations under the Privacy Rule depends on whether the employer has access to PHI for plan administration.

Sponsors of fully insured plans that do not have access to PHI have minimal obligations under the Privacy Rule.

Health plans;

Health care clearinghouses; and

Health care providers that conduct certain transactions electronically

The Genetic Information Nondiscrimination Act of 2008 (GINA) prohibits the improper collection, use or disclosure of genetic information by employers and health plans. In general, GINA prohibits group health plans and insurance issuers from:

Adjusting group premium or contribution amounts on the basis of genetic information;

Requesting or requiring individuals (or their family members) to undergo a genetic test (with limited exceptions such as for determinations regarding payment based on medical appropriateness); and

Collecting genetic information prior to or in connection with enrollment, or at any time for underwriting purposes.

The comprehensive health care reform law enacted in March 2010 (sometimes known as ACA, PPACA or “Obamacare”).

The law has 3 primary goals:

Make affordable health insurance available to more people. The law provides consumers with subsidies (“premium tax credits”) that lower costs for households with incomes between 100% and 400% of the federal poverty level.

Expand the Medicaid program to cover all adults with income below 138% of the federal poverty level. (Not all states have expanded their Medicaid programs.)

Support innovative medical care delivery methods designed to lower the costs of health care generally

On March 6, 2017, Republican leadership in the U.S. House of Representatives issued two bills to repeal and replace the Affordable Care Act (ACA) through the budget reconciliation process. These bills, which were issued by the Ways and Means Committee and the Energy and Commerce Committee, are collectively known as the American Health Care Act.

If enacted, the new law would not repeal the ACA entirely, although it would make significant changes to key provisions.
The ACA’s employer and individual mandates would be repealed retroactively beginning in 2016. Key consumer protections, like the ACA’s prohibition on pre-existing condition exclusions and dependent coverage to age 26, would remain intact.

The majority of the ACA is not affected by the new legislation. For example, the following key ACA provisions would remain in place:

Cost-sharing limits on essential health benefits (EHBs) for non-grandfathered plans (currently $7,150 for self-only coverage and $14,300 for family coverage)

Prohibition on lifetime and annual limits for EHBs

Requirements to cover pre-existing conditions

Coverage for adult children up to age 26

Guaranteed availability and renewability of coverage

Nondiscrimination rules (on the basis of race, nationality, disability, age or sex)

Prohibition on health status underwriting

The requirement to offer the EHB package for individual and small group plans also remains in place, although the actuarial value requirement would be repealed. Age rating restrictions would also continue to apply, with the age ratio limit being revised to 5:1 (instead of 3:1), and states would be allowed to set their own limits.

The American Health Care Act would provide relief from many of the ACA’s tax provisions, including:

Cadillac tax: The ACA imposes a 40 percent excise tax on high cost employer-sponsored health coverage, effective in 2020. The new law would change the effective date of the tax, so that it would apply only for taxable periods beginning after Dec. 31, 2024.

Restrictions on using HSAs for over-the-counter (OTC) medications: The ACA prohibits taxpayers from using certain tax-advantaged HSAs to help pay for OTC medications. The new law would allow these accounts to be used for OTC purchases, beginning in 2018.

Increased tax on withdrawals from HSAs: Distributions from an HSA (or Archer MSA) that are not used for qualified medical expenses are includible in income and are generally subject to an additional tax. The ACA increased the tax rate on distributions that are not used for qualified medical expenses to 20 percent. The new law would lower the rate to pre-ACA percentages, effective for distributions after Dec. 31, 2017.

Health flexible spending account (FSA) limit: The ACA limits the amount an individual may contribute to a health FSA to $2,500 (as adjusted each year). The new law would repeal the limitation on health FSA contributions for taxable years beginning after Dec. 31, 2017.

Additional Medicare tax: The ACA increased the Medicare tax rate for high-income individuals, requiring an additional 0.9 percent of wages, compensation and self-employment income over certain thresholds to be withheld. The new law would repeal this additional Medicare tax beginning in 2018.

Deduction limitation for Medicare Part D subsidy: The ACA eliminated the ability for employers receiving the retiree drug subsidy to take a tax deduction on the value of this subsidy. Effective in 2018, the new law would repeal this ACA change, and reinstate the business-expense deduction for retiree prescription drug costs without reduction by the amount of any federal subsidy. Beginning after Dec. 31, 2017, the new law would also repeal the excise tax on the sale of certain medical devices, the annual health insurance providers fee, the annual fee on certain brand pharmaceutical manufacturers and the 10 percent sales tax on indoor tanning services. It would also restore the medical expense deduction income threshold to pre-ACA levels beginning in 2018.