Under the Employee Retirement Income Security Act (ERISA), employer-sponsored group health plans are subject to various regulations and compliance criteria. These regulations ensure that employers offer comprehensive and compliant health plans for their employees (or employer members in the case of small businesses and independent contractors under an Association Health Plan (AHP), which allow multiple small employers to band together to offer affordable health coverage, and also fall under ERISA regulations.). In this article, we will discuss the relevant ERISA compliance criteria for Employer Group Health Plans and explore how these regulations affect both Association Health Plans (AHPs) and traditional Employer Group Health Plans. We will also examine any differences in how AHPs are treated compared to standard group health plans under ERISA.
ERISA Compliance Criteria for Employer Group Health Plans
ERISA sets forth several rules and requirements to safeguard the availability and quality of health benefits provided through Employer Group Health Plans. The key ERISA compliance criteria applicable to these plans include:
- Fiduciary Responsibilities: Employer sponsors of Group Health Plans are considered fiduciaries and are obligated to act in the best interests of plan participants and beneficiaries. This requires them to prudently select and monitor service providers, manage plan finances responsibly, and provide accurate disclosures of plan information[1].
- Reporting and Disclosure Requirements: ERISA mandates that employers provide various plan documents and disclosures to employees. These include Summary Plan Descriptions (SPDs) which explain the plan’s benefits, eligibility criteria, and participant rights. Employers must also furnish Summary of Material Modifications (SMMs) to inform participants of any significant changes made to the plan[2].
- Non-Discrimination Rules: ERISA prohibits Employer Group Health Plans from unfairly discriminating against employees based on their health status or other factors. These rules ensure that employers cannot selectively offer better benefits to higher-paid or healthier employees[3].
- Mental Health Parity: ERISA includes rules that demand Group Health Plans to provide mental health and substance abuse benefits on par with medical and surgical benefits. This ensures equity and equal access to necessary mental health services for all plan participants[4].
Association Health Plans (AHPs) and ERISA
AHPs, which allow small employers to pool resources and offer affordable health coverage, are also subject to ERISA regulations. In the 2018 AHP Ruling, the Department of Labor expanded AHP regulations, making it easier for small employers to form or join AHPs. This ruling is pending recission as of December 2023; However, under the current ruling, it is important to understand that AHPs must meet the same ERISA compliance criteria as traditional Employer Group Health Plans.
Under ERISA, regardless of whether a health plan is an AHP or a traditional group health plan, the same fiduciary responsibilities apply. The sponsor of an AHP is considered a fiduciary and must uphold their obligations and act in the best interests of plan participants. Similarly, reporting and disclosure requirements, non-discrimination rules, and mental health parity mandates apply to AHPs as well.
Conclusion
ERISA regulations play a vital role in ensuring that Employer Group Health Plans provide comprehensive and compliant coverage to employees. The compliance criteria prescribed by ERISA, which include fiduciary responsibilities, reporting and disclosure requirements, non-discrimination rules, and mental health parity, are essential for safeguarding the rights and well-being of plan participants and beneficiaries.
Association Health Plans, although subject to the same ERISA regulations as traditional group health plans, offer small employers the opportunity to leverage collective bargaining power and provide affordable coverage. However, it is important for AHP sponsors to be aware of their ERISA obligations and adhere to the same compliance criteria as traditional group health plans.
Employers offering Group Health Plans, whether traditional or participating in an AHP, should familiarize themselves with the relevant ERISA regulations and seek expert guidance to ensure compliance and comprehensive coverage for their employees. Enrollment First, Inc. is well-versed in compliance regulations and can support brokers, employers and associations in providing compliant healthcare solutions.
Sources:
- Department of Labor: ERISA