Providing a small business health insurance plan for your employees is one of the most rewarding, yet also challenging decisions you can make as a business owner.
It is gratifying to know that you are helping to provide health coverage for your employees and their dependents. And, you as an employer will also benefit from having a health plan in place.
But administering the plan also brings with it certain responsibilities.
The Employment Income Retirement Security Act (ERISA) sets the standards of conduct for those who manage an employee health benefit plan.
To meet their responsibilities as group health plan sponsors, employers need to understand what their responsibilities are.
Employers Required to Report Plan Activities
ERISA requires employers to provide plan information to employee participants and beneficiaries and submit reports to government agencies.
Informing Participants and Beneficiaries
The following documents must be submitted to participants and beneficiaries:
Summary Plan Description (SPD) – this is a basic explanation of the plan and must be comprehensive enough to inform participants of their rights and responsibilities under the plan. It also outlines the plan features and what to expect of the plan. This document is given to employees within 90 days after being covered by the plan and within 30 days of a request. Generally, it must be distributed every five years and must be current within 120 days. The SPD must include:
- Plan name, address and contact information
- What the plan benefits are
- How to get the benefits
- Duties of the plan and/or employee
- The plan’s claims procedure (either in the document or in a separate attachment)
- A participant’s basic rights and responsibilities under ERISA
- Information on any applicable premiums, cost-sharing, deductibles, co-payments, etc.
- Procedure for using network providers (if HMO/PPO) and composition of the network
- Conditions regarding pre-certification
- A description of plan procedures governing Qualified Medical Child Support Orders
- Notices and descriptions of certain rights under the Health Insurance Portability Accountability Act (HIPAA) and other health coverage laws
Summary of Material Modification (SMM) – informs participants and beneficiaries of material changes to the plan or to the information in the plan required to be in the SPD. The SMM or an updated SPD must be given automatically to participants within 210 days after the end of the plan year in which the material change was adopted.
However, if the changes to the plan or to the required information in the SPD result in a material reduction in covered services or benefits, then the SMM must be distributed 60 days from the date the changes were adopted. A material reduction is any plan change that eliminates benefits, reduces benefits payable, increases, premiums, deductibles, coinsurance or co-payments, reduces the service area covered by an HMO, or establishes new conditions or requirements (such as pre-authorization) for obtaining services and benefits.
Summary of Benefits and Coverage (SBC) – summarizes the key features of a plan such as covered benefits, cost-sharing provisions and coverage limitations. The SBC must include an internet address where an individual can review a Uniform Glossary of medical and insurance-related terms designed to help consumers compare the terms of their coverage and the extent of medical benefits, as well as contact information for obtaining a paper copy.
Plans and insurance companies must provide the SBC to participants and beneficiaries with the plan’s enrollment or application materials, upon renewal or re-issuance of coverage, or within 90 days of special enrollment. The SBC and the Uniform Glossary also must be provided within 7 business days of a request.
Summary Annual Report (SAR) – outlines the financial information in the plan’s Annual Report, the Form 5500 and is provided annually to participants in plans who are required to file the Form 5500.
Other Health Plan Notices
There are other notices that employers are required to provide:
Consolidated Omnibus Budget Reconciliation ACT (COBRA) - Notice of the right to purchase temporary extension of group health coverage when coverage is lost due to a qualifying event (such as end of employment) must be given when the health plan commences to the covered employee, covered spouse and dependent children who are beneficiaries. Within 14 days of the qualifying event, notice must be given to “qualified beneficiaries” of their right to elect COBRA coverage upon occurrence of qualifying event as well as information about other coverage options available, such as through the Marketplace.
Women’s Health and Cancer Rights Act (WHCRA) Notices - Notice describing required benefits for mastectomy-related reconstructive surgery, prostheses, and treatment of physical complications of mastectomy.
Reporting to the Government
Form 5500 Annual Return/Report – This form reports information about the plan, its finances and its operation. This information is used by the Department of Labor, the Internal Revenue Service (IRS), other government agencies, organizations and the public. Participants and beneficiaries can receive a copy upon request from the plan.
Depending on the number of participants covered and plan design, there may be exemptions to the full filing requirements. A group health plan with fewer than 100 participants that is either fully insured or self-funded (or a combination of both) does not need to file an annual report. Plans with more than 100 participants that is either fully insured or self-funded (or a combination of both) can file a limited report.
Compliance with the Law
It is your responsibility to ensure that your company’s health plan complies with ERISA and all federal and state laws that affect group health plans. This includes COBRA, HIPAA, the Affordable Care Act and other health plan provisions.
It is important to have a broker who can explain your responsibilities and help keep you in compliance. If you feel that you may not have been meeting all of your responsibilities, now may be the time to consider looking for a new broker.
You can read more in our recent article, Top 4 Traits To Look For In A Small Business Health Insurance Broker.
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