While many workers feel insurance coverage is an entitlement, in reality, offering health insurance to employees is purely voluntary—a matter of tradition, not law. This truth flies in the face of many firmly held beliefs about workplace benefits. But, in fact, there is no federal law that requires employers to provide or pay for health insurance coverage for all current employees, or even full-time employees. In 2004, only 61% of all working employers received health insurance coverage from their employers.
No federal legal scheme requires every employer to offer insurance coverage. However, an employer who promises to provide health insurance—in an employee manual, for example—must follow through on the promise. And benefits must be provided without discriminating against any employee or group of employees. That includes employees who are statistically more likely to incur high medical costs. For example, federal laws specifically provide that women workers and older workers must be provided with the same coverage as other workers. (See Chapter 7, Sections C and E.) One grand exception to this general rule is that many state laws now allow employers to offer health plans that offer higher premiums to smokers. (See Chapter 6, Section E.)
In recent years, some companies have discontinued or cut back on insurance coverage they offer employees, simply because of the expense. The legal rule emerging is that of evenhandedness: Employers cannot offer insurance coverage to some employees and deny it to others.
But because health insurance is a job benefit that is not regulated by law, employers are otherwise free to fashion a plan of any stripe. They may:
As anyone who has read the fine print on a health insurance policy can attest, insurers, too, place conditions on the coverage they provide. The most nettling of these limitations is on preexisting conditions. Under these provisions, if you have had a recent illness or have a chronic medical condition, you may be denied coverage, be made to wait a specific time period until your condition will be covered, or be forced to pay high premiums for specialized coverage. The greatest headway on doing away with the preexisting condition denial of coverage has been made in the federal law requiring continuing coverage for former employees. (See Section C3, below.)
Traditionally, employers that have provided health care coverage have done so through an indemnity or reimbursement plan which pays the doctor or hospital directly or reimburses the employee for medical expenses he or she has already paid.
While traditional coverage allowing employees to seek out their preferred medical provider is still widely used, a growing number of employers today provide coverage through the alternatives of a health maintenance organization (HMO) or a preferred provider organization (PPO).
An HMO is made up of hospitals and doctors who provide specified medical services to employees for a fixed monthly fee. Within the HMO service area, covered employees must use the HMO hospitals and doctors unless it’s an emergency or they receive permission to go elsewhere.
A PPO is a network of hospitals and doctors who agree to provide medical care for specified fees. Often the network is put together by an insurance company that also administers it. Employees usually can choose between using the network’s hospitals and doctors or going elsewhere.
There are two main categories of employee health insurance: coverage for current employees and coverage for former employees.
