Federal Employment Laws That Impact Compensation and Benefits

Health Benefits

There are several acts that affect how employers provide health insurance plans to their employees. These are the:

• Consolidated Omnibus Budget Reconciliation Act (COBRA)
• Health Insurance Portability and Accountability Act (HIPAA)
• Affordable Care Act (ACA)
• Family and Medical Leave Act (FMLA)
• Pregnancy Disability Act
• Uniformed Service Employment and Reemployment Rights Act (USERRA)

COBRA

COBRA entitles all eligible employees and former employees, their spouses and former spouses, and dependent children to extend their group health benefits for 18 months if terminated for reasons other than gross misconduct or up to 36 months when employment ends or hours are reduced (a qualifying event).

To be eligible, the employee must have been a participant in the company's group health plan prior to the qualifying event. The company must provide the employee with written notice explaining the employee's rights under COBRA. The employee has 60 days from the date of notice to elect COBRA coverage. COBRA coverage begins the day the employee’s health care coverage ends. The employee pays the entire group rate premium for health care coverage plus a small administrative fee, typically amounting to 2% of the monthly premium.

HIPAA

HIPAA is a federal law that imposes portability, non-discrimination, and certain other requirements on employer-sponsored health plans. HIPAA also includes regulations covering how employers must protect employees’ medical privacy rights as well as the electronic disclosure of employees’ medical information. It requires employers to cover employees’ and their dependents’ preexisting health conditions under certain circumstances, as well as protect the privacy of health information. It also ensures access to insurance for some employer groups and individuals previously unable to purchase health insurance.

Human Resources has a pivotal role to play when it comes to the HIPAA Privacy Rule, which applies to protected health information. Protected health information is individually identifiable information that relates to a participant's past, present, or future physical or mental health condition, treatment for the condition, or payment for treatment. Examples of protected health information include information related to benefits enrollment, claims processing, claims dispute resolution and premium payments. To comply with this requirement, HR departments must keep two files for each employee, one related to employment non-health related records and a second file containing all health information.

A related rule is the HIPAA Security Rule which applies only to protected health information stored or transmitted electronically and is typically a shared responsibility between HR and IT. These provisions apply to employer sponsored self-insured group health, dental and/or vision plans with 50 or more participants or that are administered by a third-party.

States' Rights

HIPAA allows states to pass legislation affecting employer medical plans as long as those laws are more beneficial than federal law. Federal HIPAA law typically sets the “floor” or minimum requirements, and state laws exceed these as the “ceiling” or maximum requirements.