Health Insurance....discrimination?
MB1004
49 Posts
We have the following tiers for our health insurance, EE, EE+1 and Family. It is also age weighted, so employees pay different amounts based upon the 4 age groups they fall into. The older you are, the more it costs us and the more you pay. I don’t oversee our benefits, but a recent question by our management company prompted me to look into how much we pay for each employee based on age group. Nothing works out to a nice percentage either. For example, for EE+1, the company covers 44% of the cost for employees under 35 and only 39% of the cost for employees in our 50-59 group. Can we run into some discrimination issues here?
Comments
tick, tick, tick, tick . . .
Do you pay a set amount per employee? We have different tiers but pay only $300 towards any one of the tiers.
I am not sure that you need to wory about this. Insurance companies use a sliding scale to determine rated in most areas. Car insurance "discriminates" against young drivers by making them pay a higher premium until they are 25 because they say statistically, young drivers are in more accidents. Life insurance premiums increase as you get older, etc.
What I discovered that a lot of employers do and where we fell into, is that instead of the company paying a flat fee, the EE pays a flat fee. So if you had each EE pay $40 a check towards their insurance, and you are charged by age bracket, your younger workers are paying a disproportionate amount compared to your older workforce since their ins is cheaper. This is illegal discrimnation. Any experts out there, correct me if I'm wrong, but I this was the way I understood it.
The regulations on discrimination in health insurance can be found at 29 CFR 1625.10.
Under this new case, your older employees could argue that, although your policy does not intentionally discriminate against older workers, it nonetheless has the net effect of doing so and is therefore discriminatory.
Luckily, the US Supreme Court provided a defense strategy for employers: If employers can show a "reasonable basis" for the policy in question, they can defeat a disparate impact age discrimination claim. If you can argue that your "reasonable basis" is the fact that you want to treat all employees equally by providing the same absolute dollar amount, then this should be a reasonable basis regardless of whether it results in lower percentage contributions.