Lawyers.com > Understand Your Legal Issue > Business Law > Small Business Law > Health Insurance for Small Businesses

Employers often provide group health insurance to employees as a way of attracting and retaining good employees. Group health plans may cover hospitalization, medical expenses and prescription drugs. They have standard provisions, such as notice of claims. Most of these plans are governed by the Employee Retirement Income Security Act (ERISA).

Definition

A group health plan is an employee welfare benefit plan established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance, with reimbursement for covered medical expenses to the insured employee, or payment directly to a healthcare provider.

Types of Coverage

Health insurance plans often contain the following kinds of coverage:

• Hospitalization. This pays a portion of the cost of the insured's hospitalization.
• Medical Expenses. This coverage usually pays for necessary medical expenses (such as doctor appointments) regardless of the sickness or injury, but it can be limited to expenses incurred for certain kinds of diseases, such as cancer.
• Drugs. Prescribed drugs and medicines are normally covered by medical expense policies, although the policy language must so provide either directly or indirectly.

Deductibles, Excess Coverage, Coinsurance

When establishing medical expense insurance premium rates, insurers recognize that the greatest economic exposure is in the earliest dollars of coverage. Insurers try to minimize this exposure by the use of three concepts:

• "Deductible," which is an amount which the insured must pay before the insurer is required to pay. For instance, if a policy provides a $100 deductible per individual in a policy year, the insurer will not pay benefits until $100 in medical expenses has been paid personally by the insured.
• "Excess" insurance, which refers to coverage only after some other available insurance coverage has been exhausted. The other available coverage is often referred to as ''primary coverage."
• "Coinsurance," which means that if there is a covered loss, the insurer pays a certain percentage (often 80%) of the expense and the insured pays the balance (20%). Often the deductible must be paid before the insurer has to pay its coinsurance amount.

Standard provisions

Group health insurance policies usually include certain ''standard provisions,'' such as:

• Notice of Claim. This is a provision requiring that written notice of a claim be given to the insurer within a certain number of days after the medical expense is incurred.
• Claim Form. This provision states that the insurer must furnish to the person making a claim, or to the policyholder for delivery to such person, the forms needed in order to file a claim.
• Payment of Benefits. This provision states that all benefits payable under the policy will be paid not more than 60 days after receipt of the proof of claim.
• Notice of Cancellation. Many state laws require insurers to provide their insureds with a notice of cancellation or premium notice (notice of when the next premium is due) if the insurance is going to be cancelled.
• Policy Continuation Provisions. Under the Consolidated Omnibus Budget Reconsideration Act of 1985 (COBRA), employees must be given the right to continue their group coverage by paying premiums equal to 102% of the normal premiums on the group basis for a ''continuation period'' after a ''qualifying event.'' A qualifying event includes things like the death of the covered employee or the termination of the insured's employment. The continuation period, which is 18 or 36 months, depends on what the "qualifying event" is. For example, the continuation period for termination of employment is 18 months after the termination date.

ERISA

Most private sector health plans are governed by the Employee Retirement Income Security Act (ERISA). ERISA provides protections for employers and employees who participate in the plans. It also requires that individuals who manage plans meet certain standards of conduct.

The Pension and Welfare Benefits Administration (PWBA) of the U.S. Department of Labor enforces ERISA. As part of carrying out its responsibilities, it provides assistance to employers and other plan providers to help them comply with ERISA.

ERISA preempts or displaces state laws if the program is a "plan" within the meaning of ERISA and if the state law or regulation relates to ERISA employment benefit plans.

If you have questions about employer-provided health insurance plans, contact a small business attorney in your area.

Questions for Your Attorney

• Is an employer legally required to provide a group health insurance plan for its employees? Do employers have to provide insurance coverage for an employee's family members?
• What makes a group health insurance plan an ERISA plan?
• Can I cancel my company's health insurance plan without the agreement of my employees?

Related Resources on Lawyers.com ^sm

- Small Business Law
- Find a Small Business Lawyer in your area
- Visit our General Business Matters Message Board for more help