As we are getting closer to year end when many employers have group insurance renewals, I thought I would share a question that we have received many times recently. The question relates to how employers can contribute to group voluntary age banded plans (or member level plans). Age banded plans charge health premiums based upon the ages of the participants. Therefore, a 20-year-old employee would receive a different premium from the carrier than a 60-year-old employee. This is in contrast to composite rated plans, which charge a certain amount for employee only coverage, family coverage etc.
Many employers are contributing a flat dollar amount for every employee in the age-banded plans. For example, the employer would contribute $350 toward the premiums of the group health plan for all employees. Under the Age Discrimination In Employment Act (ADEA), this practice would be discriminatory because older employees would pay a larger proportion of the premiums.
However, under the ADEA employers are able to pay the same proportion of premiums for all employees and it not be deemed discriminatory even though older employees would have to pay more for their coverage. For example, the employer could contribute 50% of the premiums for all employees. The older employee would still pay more premiums than the younger employee, but since they are paying the same proportion of the premiums it is not deemed to be discriminatory.
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