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CHAPTER 10
Legally Required Benefits
Learning Objectives
10-1. Discuss the origins of legally required benefits.
10-2. Summarize the four main categories of legally required benefits.
10-3. Describe fee-for-service plans, traditional managed care approaches, and more recent
consumer-driven approaches to providing health care coverage.
10-4. Summarize two additional key laws pertaining to legally required benefits.
10-5. Discuss the main benefits and costs of legally required benefits.
Outline
I. Origins of Legally Required Benefits
II. Categories of Legally Required Benefits
III. Health Insurance Program Design Alternatives
IV. Additional Health Care Legislation
V. The Benefits and Costs of Legally Required Benefits
VI. Key Terms
VII. Discussion Questions and Suggested Answers
VIII. End of Chapter Case; Instructor Notes, and Questions and Suggested Student Responses
IX. Crunch the Numbers! Questions and Suggested Student Responses
X. Additional Cases from the MyManagementLab Website; Instructor Notes, and Suggested Student
Responses
Lecture Outline
I. Origins of Legally Required Benefits
A. Historic background
1. Historically provided a form of social insurance
2. Designed to minimize the possibility that individual who became unemployed or severely
injured while working would become destitute
3. Workers’ compensation insurance came into existence when industrial accidents were
very common
4. Income discontinuity caused by the Great Depression led to the Social Security Act
5. Recently healthcare become a legally required benefit through the Patient Protection and
Affordable Care Act (PPACA)
II. Categories of Legally Required Benefits
A. Social Security Programs
1. Social Security Act established the following programs:
a. Unemployment Insurance
b. Old Age, Survivor, and Disability Insurance, OASDI
c. Medicare
2. Unemployment Insurance
a. For those unemployed through no fault of their own
b. States administer within federal parameters
i. States pay into a (federal) central unemployment fund, federal government
invests, then disburse funds back to states
ii. Does not cover most agricultural or domestic workers
c. Criteria to qualify for benefits
i. Varies from state to state
ii. In general, workers must have been employed for a minimum period of time
before filing a claim (base period)
d. Individuals receive weekly benefits, vary by state
e. Financed by federal and state taxes levied on employers under the Federal
Unemployment Tax Act (FUTA)
3. Old age, survivor, and disability insurance provides retirement income, surviviors’
insurance, disability and Medicare
4. Old age benefits
a. Determined by how much credit each worker has earned
i. Based on “quarters of coverage”
ii. Fully insured after earning credit for 40 quarters of coverage, or 10 years of
employment
b. To receive benefits, the retired worker must:
i. Be at least 62 years of age to receive reduced benefits
ii. Be at least 65 years of age to receive full benefits
iv. Between 2000–2022 age will increase to 67 (to receive full benefits)
5. Survivor benefits
a. Based on insured’s employment status and survivor’s relationship to deceased
i. Spouse (at least age 60)
ii. Dependent, unmarried children
iii. Parent (at least age 62)
b. Deceased must be fully insured for dependents to receive full benefits
6. Disability benefits
a. Must be totally disabled, based on inability to perform work done before becoming
disabled and inability to adjust to other work because of the medical condition
c. Worker must be disabled for at least a year, or the injury diagnosed as terminal
d. Quarters of coverage needed to qualify varies based on age
7. Medicare
a. Serves citizens at least 65 years of age by providing them with insurance coverage
for hospitalization, convalescent care and major doctor bills
b. Five Separate Plans
i. Medicare Part A—hospital insurance
ii. Medicare Part B—medical insurance
iii. Medigap—voluntary supplemental insurance to pay for services not covered in
Parts A and B
iv. Medicare Part C: Medicare Advantage—choices in health care providers, such as
through HMOs and PPOs
v. Medicare Part D: Medicare Prescription Drug Benefit—prescription drug
coverage
vi. May receive coverage under the original Medicare Plan or Medicare Advantage
plans
8. Medicare Part A Coverage
a. Compulsory hospitalization insurance covers both inpatient and outpatient hospital
care and services
b. Financed by both employer and employee contributions of 1.45 percent of all
earnings
9. Medical Part B Coverage
a. A voluntary supplementary medical insurance covers 80 percent of medical services
and supplies after individual pays annual deductible
b. Pays for medical care such as doctors’ services, outpatient care, clinical laboratory
services (e.g., blood tests, urinalysis) and some preventive health services (e.g.,
cardiovascular screenings, bone mass measurement), and ambulatory services when
alternate transportation would endanger one’s health
c. Part A coverage automatically qualifies an individual to enroll in Part B coverage for
a monthly premium
10. Medigap insurance
a. Supplements Parts A and B
b. Available through private insurance companies
c. Federal and state laws limit plans to ten standardized choices
d. Medicare Select offers lower premiums in exchange for limiting the choice of
providers
11. Medicare Part C Coverage – Medicare Advantage
a. Established as part of the Balanced Budget Act of 1997 renamed Medicare
Advantage in 2004
b. An alternative to Parts A and B
c. Allows beneficiaries the opportunity to receive health care from a variety of options
i. Private fee-for-service plans
ii. Managed care plans
iii. Medical savings accounts
12. Medicare Prescription Drug Program
a. Instituted in 2003, with passage of the Medicare Prescription Drug, Improvement and
Modernization Act
b. Gap in coverage in Medicare is known as the “donut hole”
c. Pays 95 percent after enrollees total $4,750 of out-of-pocket expenditures
13. Financing OASDI and Medicare programs
a. Requires equal employer and employee contributions under the Federal Insurance
Contributions Act (FICA)
b. Self-Employment Contributions Act (SECA) requires that self-employed individuals
contribute to the OASDI and Medicare programs, but at a different tax rate
14. OASDI Programs
a. The largest share of the FICA tax funds OASDI programs
b. OASDI taxes are subject to a taxable wage base
c. Taxable wage bases limit the amount of annual wages or payroll cost per employee
subject to taxation and may increase over time to account for increases in the cost of
living
15. Medicare Programs
a. Medicare tax, or hospital insurance tax, supports the Medicare Part A program
b. Employers, employees, and self-employed individuals contribute 1.45 percent;
self-employed individuals contribute double the amount, or 2.9 percent
B. Workers’ Compensation
1. Run by states individually, covers expenses incurred in employees’ work-related
accidents
2. Maritime, federal civilian, agricultural, and small businesses (less than twelve
employees) are not covered
a. Maritime workers are covered by the Longshore and Harborworkers’ Compensation
Act
b. Federal civilian workers are covered by the Federal Employees’ Compensation Act
3. Workers’ compensation objectives and obligations to the public
a. Provide sure, prompt, and reasonable income and medical benefits to work-accident
victims, or income benefits to their dependents, regardless of fault
b. Provide a single remedy and reduce court delays, costs, and workloads arising out of
personal injury litigation
c. Relieve public and private charities of financial drains
d. Eliminate payment of fees to lawyers and witnesses as well as time-consuming trials
and appeals
e. Encourage maximum employer interest in safety and rehabilitation through
appropriate experience-rating mechanisms
f. Promote frank study of causes of accidents (rather than concealment of fault),
reducing preventable accidents and human suffering
4. How workers’ compensation compares to social security benefits
a. Workers’ compensation only pays for work-related injuries whereas social security
pays benefits to workers with long-term disabilities from any cause, but only when
the disabilities preclude work
5. Recent trends in workers’ compensation
a. Number and amount have increased dramatically
b. The dramatic increase in repetitive strain injuries is a major cause of increases
6. Financing workers’ compensation programs
a. Employers generally subscribe to workers’ compensation insurance through private
carriers, or, in some instances, through state funds
b. A third funding option, self-insurance, requires companies to deposit a surety bond,
enabling them to pay their own workers’ claims directly
C. Family and Medical Leave
1. The Family and Medical Leave Act of 1993 (FMLA) aims to provide employees with job
protection in cases of family or medical emergency
2. Guarantees employees the right to return to either their same position or a comparable
one, if they are off work because of a family or medical emergency
3. Recognizes increasing prevalence of two-income families
4. Title I eligibility rules allowed up to 12 weeks of unpaid leave in a 12 month period if:
a. Absence is due to the family size increasing due to a birth or a child placement, and
is applied for within 12 months of the addition
b. There is a family member suffering from a serious medical condition
c. The employee suffers from a serious medical problem
5. Eligibility rules
a. Must be a private employer with fifty or more employees, or
b. A civilian unit of the federal government
c. Must have put in at least 1,250 hours in a 12 month period prior to application
6. Benefits
a. Twelve weeks of unpaid leave, but may be required to first use up all paid personal,
sick or vacation leave
b. Retention of all:
i. Earned seniority or employment benefits although they do not accrue while on
leave
ii. Health insurance coverage
7. Major Revisions to FMLA instituted in January of 2009 include:
a. Relatives of seriously injured members of the military may take up to 26 weeks off to
care for their injured military family members
b. Relatives of members of the National Guard or reserves who are called to activity
duty may receive up to 12 weeks of leave to attend military programs (official send
off of the family member’s troop), arrange child care, or make financial arrangements
c. Nonmilitary workers who claim to have chronic health conditions (for example,
ongoing back pain) must see their doctor at least twice per year for documentation
8. Revisions in 2015
a. Incorporates broader definition of spouse to include employees in legal same sex
marriages
D. Health Insurance
1. Health insurance covers the costs of a variety of services that promote sound physical and
mental health including physical examinations, diagnostic testing, surgery,
hospitalization, psychotherapy, dental treatments, and corrective prescription lenses for
vision deficiencies
2. The Patient Protection and Affordable Care Act of 2010 (PPACA) is a comprehensive law
that mandates health insurance coverage and sets minim standards for insurance
a. Companies with at least 50 employees are required to offer affordable health
insurance under the law
b. Employers ad individuals are subject to monetary penalties for failure to provide or
carry insurance coverage
c. PPACA distinguishes between health plans that existed prior to the March 23, 2010
enactment date and those that came into existence after
i. Grandfathered plans in existence before law
ii. Non-grandfathered plans that were new or substantially altered after law
iii. Grandfathered plans could lose status if a variety of modifications were made
d. PPACA instituted requirements that health plans remove annual dollar amount limits
on most health benefits and eliminates preexisting condition clauses all together
e. Starting in 2018, the Cadillac tax will apply to high-cost employer-sponsored health
plans
III. Health Insurance Program Design Alternatives
A. Overview
1. Employers usually enter into a contractual relationship with one or more insurance
companies to provide health-related services for their employees and, if specified,
employees’ dependents
2. The insurance policy specifies the amount of money the insurance company will pay for
such particular services as physical examinations
3. Employers pay insurance companies a negotiated amount, or premium, to establish and
maintain insurance policies; the term insured refers to employees covered by the
insurance policy
4. In the United States, companies can choose from three broad classes of health insurance
programs:
a. Fee-for-service programs
b. Managed care plans
c. Consumer-driven approach
B. Fee-for-Service Plans
1. Overview
a. Provide protection against health care expenses in the form of a cash benefit paid to
the insured or directly to the health care provider after the employee has received
health care services
b. Two types of fee-for-service plans:
i. Indemnity plans
ii. Self-funded plans
c. Indemnity plans are based on a contract between the employer and an insurance
company which specifies the expenses that are covered and the rate
d. Self-funded plans are those in which companies pay benefits directly from their own
assets, either current cash flow or funds set aside in advance for potential future
claims
e. Three types of expenses:
i. Hospitalization
ii. Surgical
iii. Physician
2. Deductibles
a. Employees must pay for services (i.e., meet a deductible) before insurance benefits
become active
b. Amounts may vary and also depend on annual earnings, either expressed as a fixed
amount for a range of earnings or as a percentage of income
3. Coinsurance
a. Refers to the percentage of covered expenses paid by the insured
b. Most indemnity plans stipulate 20 percent coinsurance, this means the plan will pay
80 percent of covered expenses; the policyholder is responsible for the difference, in
this case 20 percent
d. Insurance plans most commonly apply no coinsurance for diagnostic testing and 20
percent for other medical services; coinsurance rates for these services tend to be the
highest, usually 50 percent
4. Out-of-pocket maximum
a. Protects individuals from catastrophic medical expenses or expenses associated with
recurring episodes of the same illness
b. Usually stated as a fixed dollar amount and apply to expenses beyond the deductible
amount
5. Preexisting condition clauses
a. Condition for which medical advice, diagnosis, care, or treatment was received or
recommended during a designated period preceding the beginning of coverage
b. The Patient Protection and Affordable Care Act has eliminated preexisting condition
clauses
6. Maximum benefit limits
a. Expressed as a dollar amount over the course of one year or over an insured’s lifetime
b. Setting annual maximums provide insurance companies with greater control over
total cost expenditures
C. Managed Care Plans
1. Overview
a. Emphasize cost control by limiting an employee’s choice of doctors and hospitals
b. Three kinds:
i. Health maintenance organizations (HMOs)
ii. Preferred provider organizations (PPOs)
iii. Point-of-service plans (POS)
2. Health Maintenance Organizations
a. Prepaid medical services—fixed periodic enrollment fees cover HMO members for
all medically necessary services only if the services are delivered or approved by the
HMO
b. Generally provide inpatient and outpatient care as well as services from physicians,
surgeons, and other health care professionals
c. Most medical services are either fully covered or, in the case of some HMOs,
participants are required to make nominal copayments
3. Primary Care Physicians
a. HMOs designate some of their physicians, usually general or family practitioners, as
primary care physicians
b. Primary care physicians determine when patients need the care of specialists
c. The most important duty is perhaps to diagnose the nature and seriousness of an
illness promptly and accurately, after which the primary care physician refers the
patient to the appropriate specialist
4. Copayments
a. The most common HMO copayments apply to physician office visits, hospital
admissions, prescription drugs, and emergency room services
5. Preferred Provider Organizations
a. Select group of health care providers agrees to furnish health care services to a given
population at a higher level of reimbursement than under fee-for-service plans
b. Physicians qualify as preferred providers by meeting quality standards, agreeing to
follow cost-containment procedures implemented by the PPO, and accepting the
PPOs reimbursement structure
c. Features most similar to fee-for-service plans are out-of-pocket maximums and
coinsurance, and those most similar to HMOs include the use of nominal copayments
6. Deductibles
a. Structure and amount of deductibles under PPO plans most closely resemble practices
commonly used in fee-for-service plans
b. Higher deductibles are set for services rendered by non-network providers to
discourage participants from using services outside the network
7. Coinsurance
a. PPOs calculate coinsurance as a percentage of fees for covered services
b. PPOs also use two sets of coinsurance payments:
i. The first set applies to services rendered within the network of care providers
ii. The second to services rendered outside the network
8. Point-of-Service Plans
a. Combines features of fee-for-service systems and health maintenance organizations
b. Employees pay a nominal copayment for each visit to a designated network of
physicians
D. Specialized Insurance Benefits
1. Overview
a. Carve-out plans are set up to cover dental care, vision care, prescription drugs, mental
health and substance abuse, and maternity care
b. Specialty HMOs or PPOs usually manage carve-out plans based on the expectation
that single-specialty practices may control costs more effectively than multispecialty
medical practices
2. Prescription Drug Plans
a. Cover the costs of drugs
b. Apply exclusively to drugs that state or federal laws require to be dispensed by
licensed pharmacists
c. Three kinds of prescription drug programs:
i. Medical reimbursement plans reimburse employees for some or all of the cost of
prescription drugs
ii. Prescription card programs offer prepaid benefits with nominal copayments
iii. Mail order prescription drug programs dispense expensive medications used to
treat chronic health conditions such as HIV infection or such neurological
disorders as Parkinson’s disease
3. Mental Health and Substance Abuse
a. Twenty percent of Americans experience some form of mental illness (e.g., clinical
depression) at least once during their lifetimes
b. As a result, insurance plans provide mental health and substance abuse benefits
designed to cover treatment of mental illness and chemical dependence on alcohol
and legal and illegal drugs
c. Employee Assistance Programs (EAPs) represent a portal to taking advantage of
employer-sponsored mental health and substance abuse treatment options
E. Consumer-Driven Health Care Plans
1. Refers to the objective of helping companies maintain control over costs while also
enabling employees to make greater choices about health care
2. Flexible spending accounts permit employees to pay for specified health care costs that
are not covered by an employer’s insurance plan
a. Prior to each plan year, employees elect the amount of pay they wish to allocate to
this kind of plan and employers then use these monies to reimburse employees for
expenses incurred during the plan year that qualify for repayment
3. Health reimbursement accounts (HRA’s)
a. There are three differences between HRAs and FSAs:
i. Employers make the contributions to each employee’s HRA whereas employees
fund FSAs with pretax contributions deducted from their pay. HRA arrangements
are particularly appealing to employees with relatively low salaries or hourly
wage rates because they do not contribute to them
ii. HRAs permit employees to carry over unused account balances from year to year,
whereas employees forfeit unused FSA account balances present at the end of the
year
iii. Employers may offer employees HRAs as well as FSAs, and the use of these
accounts are not limited to participation in high-deductible health care plans,
which is the case for HSAs
4. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 added
section 223 to the IRC, effective January 1, 2004, to permit eligible individuals to
establish HSAs to help employees pay for medical expenses
5. Employers offer HSAs along with a high deductible insurance policy, established for
employees. High-deductible health insurance plans require substantial deductibles and
low out-of-pocket maximums
6. HSAs offer four main advantages to employees relative to FSAs and HRAs:
a. First, HSAs are portable, which means that the employee owns the account balance
after the employment relationship ends
b. Second, HSAs are subject to inflation-adjusted funding limits
c. Third, employees may receive medical services from doctors, hospitals, and other
health care providers of their choice, and they may choose the type of medical
services they purchase, including such items as long-term care, eye care, and
prescription drugs
d. Fourth, HSA assets must be held in trust and cannot be subject to forfeiture. That is,
any unspent balances in the HSA can be rolled over annually and accumulate tax-free
until the participant’s death. FSAs and HRAs have no legal vesting requirement,
which means employees do not possess the right to claim unused balances when they
terminate employment
IV. Additional Health Care Legislation
A. Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
1. Enacted to provide employees with the opportunity to continue receiving their
employer-sponsored medical care insurance temporarily under their employer’s plan if
their coverage otherwise would cease because of termination, layoff, or other change in
employment status
2. Individuals may continue coverage for up to 18 months
3. Companies are permitted to charge a premium for continuation coverage of up to 102
percent of the cost of the coverage to the plan
B. Health Insurance Portability and Accountability Act of 1996 (HIPAA)
1. Contains three provisions
a. Guarantee that employees and their dependents that leave their employer’s group
health plan will have ready access to coverage under a subsequent employer’s health
plan, regardless of their health or claims experience
b. Limits on preexisting conditions, however, under the PPACA preexisting condition
clauses are eliminated
c. Protects the transfer, disclosure, and use of health care information
V. The Benefits and Costs of Legally Required Benefits
A. Benefits tend to emphasize social adequacy—benefits are designed to provide subsistence
income to all beneficiaries regardless of their performance in the workplace
B. Legally required benefits may be a hindrance to companies in the short term because these
offerings require substantial employee expenditures (e.g., contributions mandated by the SSA
and various state workers’ compensation laws)
C. HR managers and other business professionals minimize the cost burden associated with
legally required benefits:
1. Reducing the likelihood of workers’ compensation claims
a. Implementation of workplace safety programs is one strategy for reducing workers’
compensation claims
b. Health promotion programs that include inspections of the workplace to identify
health risks (e.g., high levels of exposure to toxic substances), and then to eliminate
of those risks
2. Integrating workers’ compensation benefits into the rest of the benefits program
3. Employers can contain costs for unemployment insurance—systematically monitor the
reasons they terminate workers’ employment and avoiding terminations that lead to
unemployment insurance claims
End of Chapter
VI. Key Terms
Base period: The minimum period of time one must be employed to be eligible for unemployment
insurance benefits
Federal Unemployment Tax Act (FUTA): Levies federal and state taxes on employers to fund
unemployment insurance benefits
Quarters of coverage: Three consecutive months of employment during a calendar year
Fully insured: Workers become fully insured when they earn credit for 40 quarters of coverage, or 10
years of employment, and remain fully insured during their lifetime
Medicare Part A: This compulsory hospitalization insurance covers both inpatient and outpatient
hospital care and services
Medicare Part B: This voluntary supplementary medical insurance covers 80 percent of medical
services and supplies after the enrolled individual pays an annual deductible for services furnished under
this plan
Medigap: Insurance that supplements Part A and Part B coverage and is available to Medicare recipients
in most states from private insurance companies for an extra fee
Medicare Select plans: Medigap policies that offer lower premiums in exchange for limiting the choice
of health care providers
Medicare Advantage: A third Medicare program, informally referred to as Part C, provides beneficiaries
the opportunity to receive health care from a variety of options, including private fee-for-service plans,
managed care plans, or medical savings accounts
Federal Insurance Contributions Act (FICA): Requires that employers pay a tax based on their
payroll; employees contribute a tax based on earnings, which is withheld from each paycheck
Self-Employment Contributions Act (SECA): Requires that self-employed individuals contribute to
the OASDI and Medicare programs, but at a higher tax rate
Taxable wage base: Limits the amount of annual wages or payroll cost per employee subject to taxation
Medicare tax: Portion of FICA that supports the Medicare Part A program
Hospital insurance tax (HI): Portion of FICA that supports the Medicare Part A program
Longshore and Harborworkers’ Compensation Act: Mandates the maritime workers’ compensation
program
Federal Employees’ Compensation Act: Provides workers’ compensation protection to federal civilian
employees receive
Family and Medical Leave Act of 1993 (FMLA): Aims to provide employees with job protection in
cases of family or medical emergency
Health insurance: Covers the costs of a variety of services that promote sound physical and mental
health, including physical examinations, diagnostic testing, surgery, hospitalization, psychotherapy, dental
treatments, and corrective prescription lenses for vision deficiencies
Patient Protection and Affordable Care Act of 2010 (PPACA): A comprehensive law that mandates
health insurance coverage and sets minimum standards for insurance
Grandfathered plans: Individual and group health plans already in existence prior to enactment of the
PPACA
Non-grandfathered plans: New health plans or preexisting plans that have been substantially modified
after March 23, 2010
Cadillac tax: Applies to high-cost employer-sponsored health plans
Insurance policy premium: A negotiated amount employers pay insurance companies
Fee-for-service plans: Provide protection against health care expenses in the form of a cash benefit paid
to the insured or directly to the health care provider after the employee has received health care services
Indemnity plans: A type of fee-for-service plan based on a contract between the employer and an
insurance company
Self-funded plans: A type of fee-for-service plan where the company pays benefits directly from their
own assets with either current cash flow or funds set aside in advance for potential future claims
Self-funding: Makes sense when a company’s financial burden of covering employee medical expenses
is less than the cost to subscribe to an insurance company for coverage
Deductible: The amount the employee must pay in a designated period before insurance benefits become
active
Coinsurance: Refers to the percentage of covered expenses paid by the insured
Out-of-pocket maximum: The maximum amount the insured must pay per calendar year or plan year
Preexisting condition: A condition for which medical advice, diagnosis, care, or treatment was received
or recommended during a designated period preceding the beginning of coverage
Maximum benefit limits: Expressed as a dollar amount over the course of 1 year or over an insured’s
lifetime
Managed care plans: Emphasize cost control by limiting an employee’s choice of doctors and hospitals
Prepaid medical services: Description of a Health Maintenance Organization (HMO) because fixed
periodic enrollment fees cover HMO members for all medically necessary services only if the services are
delivered or approved by the HMO
Copayments: Represent nominal payments an individual makes as a condition of receiving service
Primary care physicians: Determine when patients need the care of specialists
Preferred provider organization (PPO): A select group of health care providers agrees to furnish health
care services to a given population at a higher level of reimbursement than under fee-for-service plans
Point-of-service plan (POS): Combines features of fee-for-service systems and HMOs
Carve-out plans: When employers use separate insurance plans to provide specific kinds of benefits
Prescription drug plans: Cover the costs of drugs
Medical reimbursement plans: Reimburses employees for some or all of the cost of prescription drugs
Prescription card program: Dispenses expensive medications used to treat chronic health conditions
such as human immunodeficiency virus (HIV) or such neurological disorders as Parkinson’s disease
Mail order prescription drug program: Dispenses expensive medications used to treat chronic health
conditions such as human immunodeficiency virus (HIV) or such neurological disorders as Parkinson’s
disease
Consumer-driven health care: Refers to the objective of helping companies maintain control over costs
while also enabling employees to make smarter choices about health care
Flexible spending accounts (FSAs): Permit employees to pay for specified health care costs that are not
covered by an employer’s insurance plan
Health reimbursement accounts (HRAs): Similar to an FSA except employers make the contributions,
employees can carry over unused account balances from year to year, and participation is limited to
high-deductible health care plans
Medicare Prescription Drug, Improvement and Modernization Act of 2003: Added
Section 223 to the IRC, effective January 1, 2004, to permit eligible individuals to establish health
savings accounts
Health savings accounts (HSAs): Help employees pay for medical expenses
High-deductible health insurance plans: Require substantial deductibles and low out-of-pocket
maximum
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA): Enacted to provide employees
with the opportunity to continue receiving their employer-sponsored medical care insurance temporarily
under their employer’s plan if their coverage otherwise would cease because of termination, layoff, or
other change in employment status
