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Health Insurance "Waiver"
Benefits & Compensation
Health Insurance "Waiver"
Exchange ideas about health plans, retirement, work/life benefits, and employee assistance.
Here is the dilemma: small employer with eight employees pays 100% of health insurance costs for employees. One employee has never taken company-provided health insurance, and lobbied for and received
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Forums » Topic Forums » Benefits & Compensation » Health Insurance "Waiver"
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Health Insurance "Waiver"
posted at 2/25/2009 8:26 AM EST
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Posts: 62
First: 9/13/2005 Last: 11/19/2010 |
Here is the dilemma: small employer with eight employees pays 100% of health insurance costs for employees. One employee has never taken company-provided health insurance, and lobbied for and received higher compensation as a result (considering the entire "compensation package" as salary, benefits, etc.). Nothing was put in writing about this, and a health insurance waiver was never signed. At open enrollment, that employee is now signing up for family health insurance, which is a huge, unexpected increased cost for this small company. What options does the company have? They are now considering a cost-share for all employees, but its a difficult pill to swallow for all employees to be affected under these circumstances. Any thoughts? |
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Health Insurance "Waiver"
posted at 2/25/2009 8:40 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
The employer can definitely lower his salary prospectively (future) OR they could possibly require him to pay 100% of the coverage. I would not foist the cost onto the other employees. I know of one company that does just that....if you opt out at hire, you get the higher salary but then you have to pay 100% at time of eligibility/acceptance of the benefit.
We do things a bit differently here in that we look at total cost (pay+taxes+benefits). And if one of those changes then then other does too....to keep to a total cost. So in our case his benefits would go up but his pay would go down. But our employees know this and it is "published". The question is what was communicated to him at the time, even if it was not in writing? And you do have to consider that others might opt out of benefits for higher pay. Do you have a participation requirement? Do you really want to pay people to not participate? |
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Health Insurance "Waiver"
posted at 2/25/2009 9:04 AM EST
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Posts: 62
First: 9/13/2005 Last: 11/19/2010 |
Thanks for your thoughts. We were concerned that lowering salary or requiring that employee to pay 100% of the premium cost would violate ERISA retaliation/non-discrimination provisions?
Obviously, this situation was not handled ideally. Live and learn.... |
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Health Insurance "Waiver"
posted at 2/25/2009 9:32 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
Interesting thought regarding ERISA...let me read up some more on that aspect. It might be that company was able to do it becuase of the waiver in the beginning.
Now you have me more curious...unfortunately it is time to go pick up my son. I will try to do some research tonight from home. |
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Health Insurance "Waiver"
posted at 2/25/2009 10:15 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
TC, can you email me directly at hr@embodyfitnesscenter.com? I have a scenario/idea to brainstorm with you if you are interested!
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Health Insurance "Waiver"
posted at 2/25/2009 11:13 AM EST
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Posts: 64
First: 4/18/2002 Last: 7/16/2010 |
Please share the results of brainstorming if you are willing. Interesting topic to me.
I had a similar situation years ago, and now we let employees know that they will not be eligible to receive waived health care costs as higher wages. |
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Health Insurance "Waiver"
posted at 2/25/2009 3:19 PM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
I am not an attorney nor do I play one on TV, but I do like to brainstorm. Usually I can back my position with specific links, but I am not overly familiar with ERISA as it relates to health plans.
My thought was of all the companies that pay an "opt out" premium to employees who chose to not be on the plan and then take it away when they "opt in". They don't seem to be violating ERISA's retaliation provision. But do they have this written in their health plan document and summary plan description (SPD)? But if it is not in the plan doc or SPD, can it be done? Does it NEED to be in there? I am wondering if the OP's employee was the only one to opt out. If so, could that in essence be defined as the "default" choice? If the employee does NOT opt in and join the health plan, could they get that amount in salary? In essence that is what has happened so far without documentation. When they do opt in, they only lose what they got for the opt out -- in this case 100% of what it would have cost. They still have all the rights and benefits. They still are eligible to join the plan just like other employees. And they aren't losing out on any salary since what they truly got was an "opt out premium". Of course it depends on any paperwork, salary negotiations/calculations that were written. Was there a job posting that gave a pay range? Is it obvious that this person got more than the base salary? The OP stated the employee didn't sign any waiver, but did he sign anything turning down participation in the plan? Our health insurance company requires that all employees fill out the enrollment form and waive benefits if they don't want them. Has anyone tried to talk to this employee to see what their understanding was? It could be that the employee is expecting their salary to drop. Or would be more understanding about the situation. Could the employee now sign something that stated that the "opt out" money was just that? My last ditch effort was to wonder if the OP could change the benefit/wage setup and create a cafeteria plan where the employer gave $x total to each employee for benefits on top of a new base salary. The employee could chose where to put that $x -- health premiums, 401k deferrals, other insurance etc.... Just my thoughts in the car on the way home...There has to be some way around this since I know other employers who have been in this situation. Maybe because they got it in writing upfront....honestly I would try to find a consultant or attorney who is well versed in how to deal with ERISA and health plans. |
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Health Insurance "Waiver"
posted at 2/27/2009 8:01 AM EST
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Posts: 1047
First: 4/11/2002 Last: 9/14/2011 |
I would just go back to the employee and say your company will handle this one of 2 ways:
1. You will take back the extra compensation you gave him for opting out of the health insurance plan before and pay 100% of the health insurance premiums going forward; or 2. He can pay the difference between what was previously given to him and the annualized health insurance premiums. While you may not have it documented, I don't see any issues here so long as a pay adjustment woulnd't bump him under minimum wage. I don't see how he could possibly argue that this would be unfair since everyone knows it happened. I would also suggest creating an opt-out policy if you're going to continue to offer this option to employees going forward. Needless to say it's always better to have something in someone's file at a time like this. Lastly, if you end up going with option 2, you should consider whether or not you're going to add a Section 125 POP plan to let this employee pay for premiums on a pre-tax basis. It's going to cost at least $500 to implement, but it may be a way for you as the employer to look good. |
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Health Insurance "Waiver"
posted at 2/27/2009 8:22 AM EST
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Posts: 2146
First: 2/15/2006 Last: 9/14/2011 |
Actually I was able to implement a POP for $99....plan document and all forms. If you want a reference, I had great luck with this company.
Of course there may be some payroll setup time, employee meetings, etc. but the actual implementation is not hard and well worth the savings on the Employer payroll tax side (FICA). |
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Health Insurance "Waiver"
posted at 2/27/2009 9:55 AM EST
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Posts: 1047
First: 4/11/2002 Last: 9/14/2011 |
$99 eh? What about discrimination testing? Would it be convenient to add on an FSA? Not to say it couldn't be done for $99 since everything is pretty boiler plate, however, that price would scare me away. |
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