Employee Benefits: Concepts and Health Care Benefits (Group Health Plan Design, Financing, and Regulation)
Domain overview
This domain tests how group health plans are designed, financed, and regulated in the U.S. employer context. Expect questions on ERISA welfare-plan status, ACA market reforms, HIPAA portability, COBRA, Medicare Secondary Payer, and the choice between insured and self-funded arrangements.
Plan design and financing
Group health plans are ERISA welfare benefit plans. Design choices include deductibles, coinsurance, out-of-pocket maximums, copays, provider networks, prescription tiers, and whether to pair an HDHP with an HSA. Financing is either fully insured (the carrier bears claims risk and state insurance law applies) or self-funded (the employer bears claims risk, ERISA preemption generally applies, and stop-loss insurance protects catastrophic claims). Level-funded and minimum-premium arrangements blend the two.
Regulation
ACA reforms prohibit annual and lifetime dollar limits on essential health benefits, require preventive services without cost sharing, extend dependent coverage to age 26, and impose employer shared responsibility under IRC 4980H for applicable large employers (50+ full-time equivalents). HIPAA provides special enrollment and creditable coverage rules; ACA further restricts preexisting-condition exclusions. COBRA requires continuation coverage for employers with 20+ employees after qualifying events: generally 18 months for termination or reduction in hours, 29 months for disability, and 36 months for death, divorce, or Medicare entitlement. Medicare Secondary Payer makes group health plans primary for active employees. Mental Health Parity and GINA also apply.
Worked example
A 180-employee employer switches from a fully insured PPO to self-funding with $50,000 specific stop-loss. Reasoning: the employer avoids state benefit mandates and premium tax and gains cash-flow control, but remains subject to ERISA, ACA, HIPAA, COBRA, and nondiscrimination rules. Stop-loss caps large individual claims, not aggregate risk. The plan must still provide SBCs, SPDs, and Form 5500 reporting.
Traps
Do not assume self-funding escapes ACA; it does not. COBRA durations are event-specific, and the 29-month disability extension requires a Social Security disability determination. HSA eligibility is destroyed by general-purpose FSA or HRA coverage. Count full-time equivalents correctly for IRC 4980H.