Group Health Plans and Compliance: What Employers Should Keep in Mind

Key Takeaways

• Employers must navigate complex federal and state regulations to keep group health plans compliant. Ignoring compliance obligations can open organizations to fines and reputation damage, affecting the company and its workforce.
• Regular updates and best practices are vital to avoid penalties and deliver value to employees. Staying proactive helps foster trust and ensures your group health plan aligns with legal and ethical standards.
• Understanding regulations like ACA, ERISA, HIPAA, and COBRA is foundational for compliance. These laws impact nearly every aspect of plan administration, from documentation to privacy protocols and extending coverage options.

Table of Contents

1. Understanding Key Regulations
2. Recent Compliance Updates
3. Common Compliance Pitfalls
4. Best Practices for Compliance
5. State-Specific Considerations

Navigating group health plans can be complex for employers, especially as regulations and employee expectations continue to evolve. Providing competitive healthcare benefits is a tool for talent retention and a significant compliance responsibility. Employers must understand how federal mandates like the Affordable Care Act (ACA), COBRA, and HIPAA impact their group health offerings. From plan design to eligibility and reporting requirements, staying informed helps minimize legal risks and ensure employees receive the benefits they’re entitled to.

To remain compliant, employers should routinely review their benefit offerings and stay updated on legislative changes. Leveraging resources like https://www.adp.com/what-we-offer/benefits/group-health-insurance.aspx can provide insights into group health plan options and the latest compliance considerations. This helps companies make informed decisions about coverage levels, enrollment processes, and documentation practices, ensuring they effectively meet regulatory obligations and employee needs.

Understanding Key Regulations

Employers who provide group health coverage must adhere to a network of foundational laws. These regulations are designed to protect employees and provide a framework that employers must understand and follow:

• The Affordable Care Act (ACA): Requires applicable large employers—generally those with 50 or more full-time employees—to offer affordable, minimum-value health insurance or face potential financial penalties. The ACA also sets reporting and coverage affordability standards, which means employers must provide coverage and ensure it’s reasonably priced relative to employee wages.
• Employee Retirement Income Security Act (ERISA): Mandates that employers provide clear plan documentation, including a Summary Plan Description (SPD), and adhere to fiduciary responsibilities to protect plan participants’ interests. ERISA’s rules also require employers to act impartially and solely in the best interest of plan beneficiaries, document all decisions, and oversee service provider performance carefully.
• Health Insurance Portability and Accountability Act (HIPAA): This act governs the privacy and security of employees’ health information. Employers must implement administrative, physical, and technical safeguards and provide required privacy notices. HIPAA privacy rules apply to health information handled during communications about eligibility, claims, and wellness programs, imposing detailed requirements to secure any data transmitted or stored.
• Consolidated Omnibus Budget Reconciliation Act (COBRA): Compels employers with 20 or more employees to offer extended health coverage to employees and their families following qualifying events, such as job loss, divorce, or reductions in work hours. COBRA rules require employers to communicate rights, track deadlines, and collect appropriate premiums from beneficiaries choosing continuation coverage.

These statutes contain critical compliance elements ranging from plan documentation and privacy protocols to ongoing notice requirements and coverage standards. Failing to comply can expose employers to federal enforcement actions and potential participant lawsuits. Because the consequences of non-compliance can be severe, it’s essential for employers to dedicate resources to tracking legal changes and implementing necessary updates to their plans and procedures.

Recent Compliance Updates

With health insurance regulations evolving, employers must stay updated on new and amended rules to maintain compliant plans. Changes often occur at federal, state, and local levels, making it important for organizations to review their health plan practices at least annually.

• HIPAA Privacy Rule Enhancements: As of June 25, 2024, new federal rules further strengthen privacy protections for reproductive health information. Employers must review and revise their HIPAA policies and train staff on updated protocols to avoid violations. These updates require employers to verify that their data handling and authorization processes fully comply with new requirements.
• Price Transparency Rule: Employers must annually attest compliance with the federal “gag clause prohibition” on health plan price transparency. The inaugural attestation deadline was December 31, 2023. Employing workflows to confirm openness and public pricing disclosure can help avoid enforcement penalties. Transparent practices empower employees to make more informed healthcare decisions.

Other notable compliance developments over the past year have included expanded mental health parity enforcement and a renewed federal emphasis on timely documentation delivery. Employers are being held accountable for implementing compliance systems and following through on all required filings or attestations. Staying current with official government bulletins and consulting with benefits experts ensures employers aren’t surprised by regulatory shifts or new guidance.

Common Compliance Pitfalls

Many employers face compliance challenges, and even well-intentioned organizations can make mistakes that result in unnecessary risk and potential penalties. Recognizing these common pitfalls is the first step toward mitigation and efficient issue resolution.

• Inadequate Plan Documentation: Omitting official plan documents or failing to provide timely, accurate Summary Plan Descriptions may trigger fines or lawsuits. Employers sometimes overlook updates when benefits change, leading to outdated or incomplete information shared with participants.
• Overlooking Annual Notices: Required notices—such as the Summary Annual Report and COBRA notifications—must be delivered promptly. Missed or delayed distribution is a common source of penalties. Employers should set automated reminders to ensure annual notifications are always provided on time.
• Incomplete Compliance with COBRA: Missing or inaccurate COBRA election notices can incur significant statutory penalties and leave affected employees vulnerable. Tracking documentation and sending timely notices is crucial to meet legal requirements and prevent disputes.

Organizations should develop internal checks to spot common errors early on and implement consistent processes to distribute documentation and notices in line with regulatory timelines. Establishing a compliance calendar and designating an employee or external partner to oversee the process can minimize risk exposure. For additional compliance best practices, consult the U.S. Department of Labor resources.

Best Practices for Compliance

1. Stay Informed: Assign a responsible staff member or team to monitor updates from federal agencies and benefits industry news. Regularly reviewing publications, newsletters, and new guidance avoids lapses in compliance. Warning of regulatory changes allows for smoother transitions and internal planning.
2. Conduct Regular Audits: Schedule annual or semi-annual audits of benefits processes, plan documents, and participant communications. Proactive spot-checks can catch gaps before they escalate. Consider using auditing checklists to ensure all aspects are reviewed, from notices to claim processes and privacy controls.
3. Provide Training: Ongoing education for HR teams, benefits administrators, and executives ensures each individual understands their compliance responsibilities and emerging requirements. Training should be refreshed periodically after significant regulatory updates or plan changes.
4. Engage Professional Advisors: Working with legal counsel, accountants, or specialized benefits consultants can help resolve complicated issues, particularly when facing new regulations or plan changes. Advisors help interpret complex rules and offer practical recommendations for day-to-day plan management.

State-Specific Considerations

Many states impose unique mandates on group health plans beyond federal baseline rules. These may include additional coverage requirements (such as mental health or infertility benefits), extended COBRA provisions, or supplemental notice obligations. Employers must know their state’s laws, especially if they operate in multiple jurisdictions. Some states also require enhanced data privacy measures, offer benefit continuation mandates that differ from COBRA, or have stricter claims review standards.

If your company employs individuals in multiple states, use a multi-jurisdictional compliance checklist and consult a regional benefits advisor to pinpoint applicable mandates. Tracking state and local legislative changes helps ensure your organization remains compliant wherever you do business, avoiding costly gaps or inadvertent legal issues as rules change rapidly across jurisdictions. Timely updates, effective communication, and detailed record-keeping will support your ability to meet state-specific requirements efficiently.