Health insurance only for execs' kids?

August 14, 2009 6:56 AM

Can a company provide health insurance for an executive's dependents (spouse, kids, etc) but not for other employees' dependents?

Is it legal for a company to provide health insurance for some of its employees' dependents but not for others? For instance, can the plan specify that it covers the CEO's spouse and kids but not a web developer's or project manager's kids? (given that all three employees are eligible for insurance, etc). There was a bit of discussion of this issue in this thread, but I'd like to hear (a) whether anyone has actually experienced a policy like this and (b) what, if any, regulations (HIPAA, ERISA, etc) might prohibit it.

I'm asking for a friend who is located in Virginia and works at a company with fewer than 10 employees. This is *not* the insurance plan currently implemented at their company, but a proposed change to the existing plan.

posted by ethorson to work & money (8 comments total)

This isn't exactly the same but the superintendent of the school district in my city had something written into his contract where the district had to cover the cost of his hearing aids, but hearing aids were not covered for any other employees of the district.
posted by ishotjr at 7:15 AM on August 14

Specific insurance coverage may be part of a CEO's contract; in that case, that's the way it is, fair or not. Especially in a small company. It's not good for morale, but it's probably not illegal.
posted by killy willy at 7:28 AM on August 14

Typically a company can divide employees into different "classes" based on function (management vs line workers, for example), benefits for each class can be different, benefits within a class must be equal.
posted by HuronBob at 7:33 AM on August 14 [1 favorite]

Was a licensed insurance agent, but IANYagent, and wasn't licensed in Virginia: What it sounds more like is that the company doesn't want to *exclude* anybody, but offer a varying scale on how much premium the company is covering -- which is very frequently done. A CEO/owner can have 100% of a family plan paid by the company, while regular employess only get a single rate (whatever the insurance company or legal minimum is) covered, but the lower employee still has the ability to pay the balance of a family plan if they so choose. This is perfectly fine as long as the dividing line is clearly defined, and NOT obviously discriminating on arbitrary (only the CEO's buddies get good insurance) or illegal (keep women and old people off the plan, pregancies and diabetes raise rates) grounds. This is comparable to the CEO getting 4 weeks paid vacation a year and grunts getting 1 week -- not illegal, unless somebody's being arbitrarily discriminated against, so make sure it's in the employee handbook with specifics on who gets what benefits.
posted by AzraelBrown at 7:40 AM on August 14

I believe that employer-provided health insurance laws might vary from state to state. For example, a friend of mine owns a small business, and about 10 years ago he was looking into getting a group health plan. He found out that in the state of Michigan it is illegal for an employer to offer different levels of coverage to different employees (for example, he couldn't have an all-inclusive policy, with dental and prescription coverage, etc, for himself and offer a more bare bones policy to his employees). The company could have restrictions as to which employees were eligible for coverage, but it had to be universal and based on something tangible like part-time versus full-time employees, and not hierarchical like senior management versus clerical staff. In the early 2000s I worked for a smallish company (less than 100 employees) where the owner had a very comprehensive Blue Cross plan for himself and his family, and the company-provided plan for the employees was SelectCare, an HMO. Someone must've blown the whistle on him, because one day we all got a memo stating that our health plan was being switched to Blue Cross, and I heard through the grapevine that the switch had the boss kicking and screaming behind the scenes. I know of some employers in Michigan that offer varying levels of coverage within their organization - for employee only, for employee and spouse, for employee and all dependents - but again, the dividing line is number of hours worked, and nothing else.
posted by Oriole Adams at 10:20 AM on August 14

To sort of build on Oriole Adams, he is right that in some states it is illegal for an employer to offer different levels of coverage to different employees, and when we set up our plan in VA were told this by our agent. I'm not an insurance agent, and it would probably be a good idea to talk to one licensed in VA to get all the details/ins and outs of the rules.
posted by zara at 10:46 AM on August 14

Oh, and specifically- we were not allowed to treat executives any differently than any other full time staff
posted by zara at 10:47 AM on August 14

Typically a company can divide employees into different "classes" based on function (management vs line workers, for example), benefits for each class can be different, benefits within a class must be equal.

I once worked for a large company in Virginia that did provide significantly more luxurious health-care benefits to executives than other classes of workers. I'm quite certain that this company was on the up-and-up regarding the legality of this, at least at the time (mid-90s.)
posted by desuetude at 11:13 AM on August 14