Drafting a Benefit Plan
It is essential to communicate to employees any changes arising from becoming self-insured and this will include any changes to coverage that will mean that coverages that were previously covered are no longer included.
1. Compliance with Federal Laws When drafting a plan a self-insurer needs to ensure that it is compliant with
- ERISA
- The Tax Code
- Federal Laws with prohibit discrimination such as the Americans with Disabilities Act (ADA), the Mental Health Parity Act, the Health Insurance Portability and Accountability Act, the Pregnancy Discrimination Act, the Newborn's and Mothers' Health Protection Act and the Women's Health and Cancer Rights Act.
2. Drafting the Plan
When designing a benefit plan, the parts that are subject to variation are as follows:
(i) Covered Employees
There is no law requiring that an employer provides health benefits to its employees and therefore it is possible to exclude some classes of employee such as part-time or those with less than three years service with the company.
(ii) Covered Benefits
Benefits can be tailored to exclude many coverages that are mandated by State laws (such as cosmetic surgery).
(iii) Co-Insurance
A plan can be drafted to contain an element of cost sharing by the employee. This can take the effect of a deductible or co-insurance where the employee pays a percentage of all claims, or a combination of both. Cost sharing by an employee provides an incentive to keep the costs as low as possible, which benefits the self-insurer financially.
(iv) Policy Limits
Whilst most plans will contain a lifetime limit of $1,000,000 or $2,000,000, sub limits can be imposed for certain procedures such as physiotherapy or other outpatient services.
(v) Retiree Benefits
When an obligation to cover retirees is made an employer now accrues a financial liability under the Financial Accounting Standard (FAS) 106 as opposed to being able to treat them on a pay as presented basis. This change has forced many employers to exclude retirees from their benefit plans.
