Federal Laws That Regulate Group Health Insurance In America

The Consolidated Omnibus Budget Reconciliation Act, also known as COBRA, was enacted in 1985 to extend group health coverage to former employees and their families for up to 18 or 36 months after termination of employment. An employer group must consist of at least 20 employees. The COBRA premium rate remains the same as the group rate, but the terminated employee pays more because there is no longer an employer contribution. Qualifying for COBRA occurs when the employee, spouse, or dependent child becomes ineligible for coverage under the group insurance. Examples include family coverage after the death of a covered employee, termination of employment or reduction of hours under full-time status, Medicare eligibility, legal separation spousal coverage, child ineligibility on the group plan, or if the employer declares bankruptcy and employment ends. Employee termination resulting from misconduct does not qualify under COBRA.

A qualified beneficiary is considered to be anyone covered under the group policy the day before the qualifying event occurs and normally includes the employee, spouse, and dependent children. Written eligibility notification must be given to employees and spouse or other dependents by the employer when the group plan becomes eligible for COBRA or when a qualifying event occurs. A 60-day period is allowed to elect COBRA coverage, after which the employee is no longer eligible.

The purpose of continuation coverage is to provide time for the terminated employee to either apply for new coverage under a new group plan or apply individually (or become eligible for Medicare). A maximum of 18 months is allowed if employment was terminated or hours were reduced to less than full-time status while all other qualifying events allow for 36 months of continual coverage. COBRA coverage ends when a disqualifying event occurs such as failure to pay premium, Medicare entitlement, or once new insurance is issued.

The Omnibus Budget Reconciliation Act, also known as OBRA, was enacted in 1989, and it extends COBRA continuation benefits from 18 months to 29 months for disabled employees at the time of the qualifying event or who become disabled during the first 60 days of COBRA coverage . It also clarified Medicare entitlement versus eligibility to ensure that the individual is covered by Medicare before being considered a disqualifying event.

The Health Insurance Portability and Accountability Act, also known as HIPAA, was enacted July 1, 1997, it provides both for the portability of group insurance from one employer to another or from an employer sponsored policy to an individual policy if becoming self-employed. There are several common components to HIPAA. One component is that a new employer must offer continual coverage to a new employee if the employee is switching from a previous employer's coverage (if previously covered for at least the last 18 months). Insurance portability is mandated for 63 days between jobs, to allow ample time for an employee to switch coverages. Individual insurance through self-employment is considered portable from group insurance. Also, pre-existing condition exclusions for anyone seeking medical advice in the last 6 months can only apply for the first 12 months of a new plan and does not apply to newborn care, adopted children, or existing pregnancy as of the effective date of the policy.

The Employee Retirement and Income Security Act, also known as ERISA, was enacted in 1974, and it protects group insurance participants against insurer and employer misconduct by requiring strict record keeping and reporting of all health plan transactions, benefits, amendments, claims, denials, and certificates of participation. Administrative records must be maintained with the Department of Labor and financial reports must be filed annually with the IRS.

The Age Discrimination in Employment Act, also known as AEDA, was enacted in 1967 and applies to employer groups of 20 or more employees. The ADEA's protections apply to both employees and job applicants age 40 and older from employment discrimination based on age.

The Tax Equity and Fiscal Responsibility Act, also known as TEFRA, was enacted in 1982 and applies to employer groups of 20 or more employees. It protects employees and their spouses between ages 65 – 69 from discrimination in group life insurance from only being offered to key employees, such as executives or select top-tiered employees, and not the entire group. It requires older employees to receive the same coverage as younger employees.

Finally, the Americans with Disabilities Act, also known as ADA, was enacted in 1990 and applies to employer groups of 15 or more employees. It protects qualified individuals with disabilities in job application procedures, hiring, firing, advancement, compensation, and all other facets of employment. It also requires disabled employees to be given equal access to the group's health care coverage and can not limit or exclude group health coverage for deafness, AIDS, cancer, major disease, or general disability.