Health Insurance....discrimination?

MB1004

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?

System

There's no doubt about it! Your fees are blatently discriminatory by age.

tick, tick, tick, tick . . .

Don D

Sure it's discriminatory. The real question is is it illegal discrimination. I'm not sure. Every policy I've ever applied for has a sliding age/cost scale. The same applies to the optional life products we offer employees. What's the difference?

nietra

How are the amounts determined?

Do you pay a set amount per employee? We have different tiers but pay only $300 towards any one of the tiers.

HRinFL

I think nietra has a point. If you pay a flat rate per ee, I do not see any issue. Your provider may charge you more to cover ees in a certain age bracket, due to the higher costs associated with services needed, so the percentage of what you contribute may be less, even though your company is being consistent with your contribution.

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.

System

Nietra's plan is not discrimination because the company pays the same amount for each employee's coverage, regardless of age. I've never seen a plan in Maryland where the fee scales are separated by age. They're usually separated by tiers such as Single, Spouse only, Employee and child(ren) and Family. The rates are the same for all employees. Now, I'm not sure after reading all those posts.

MB1004

Since my original post, I did a little more digging. From what I've been told, as an employer, if you are paying a flat amount towards benefits which would create an unequal percentage across the age brackets, you are still in compliance because you are not discriminating against any one age group. You can also be in compliance if you pay a specific percentage for each tier. For example, if you cover 60% for EE+1 no matter their age, you are compliant even though the scale is sliding.

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.

gregoryscott

Besides the health coverage discrimination, this reminds me of the recent US Supreme Court case allowing "disparate impact" claims under ADEA.

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.