Health Plan Rules—Treating Employees Differently

Some employers may want to be selective and treat employees differently for purposes of group health plan benefits. For example, employers may consider implementing the following plan designs:

A health plan “carve-out” that insures only select groups of employees (for example, a management carve-out);

Different levels of benefits for groups of employees; or

Varied employer contribution rates based on employee group.

In general, employers may treat employees differently, as long as they are not violating federal rules that prohibit discrimination in favor of highly compensated employees. These rules currently apply to self-insured health plans and arrangements that allow employees to pay their premiums on a pre-tax basis. The nondiscrimination requirements for fully insured health plans have been delayed indefinitely.

Employers should also confirm that any health plan rules do not violate other federal laws that prohibit discrimination. In addition, employers with insured plans should confirm that carve-out designs comply with any minimum participation rules imposed by the carrier.