QUESTION: Our company wants to establish an on-site clinic for our employees. Is it possible to design it so that complex federal benefits laws such as ERISA and COBRA do not apply?
ANSWER: Yes—the types of services provided by the on-site clinic generally determine whether the clinic is a group health plan subject to ERISA and COBRA. Specifically, an on-premises facility that treats minor injuries or illness or renders first-aid for accidents occurring during working hours is exempt from ERISA. The IRS COBRA regulations contain a similar exemption. On the other hand, an on-site clinic that provides more than mere first aid or treatment for minor injuries may be a group health plan subject to ERISA and COBRA.
You will need to be careful not to deviate from the narrow exemption for on-site first-aid clinics. For example, the DOL has determined that the on-premises facilities exemption does not apply to an EAP staffed by an on-site counselor where dependents of employees were eligible and benefits (counseling involving mental health) went beyond treatment of “minor injuries.” In addition, full-blown on-site medical clinics providing more extensive care (including care for employees’ families) have been determined to fall outside the exemption. And while these examples included coverage for family members, an on-site clinic providing sufficiently extensive care may fall outside the exemption even if coverage is limited to employees.
Because on-site clinics can be expensive to create and maintain, you should carefully weigh the anticipated benefits of establishing a clinic against the expected costs, including the cost and administrative burden of legal compliance if it is not exempt. For example, COBRA compliance can be particularly cumbersome for an on-site clinic because most employers do not want to grant worksite access for former employees to visit an on-site clinic. In addition, other benefits laws may be implicated regardless of the scope of benefits provided. For instance, although on-site medical clinics are excepted from complying with HIPAA’s portability rules, an on-site clinic may be subject to HIPAA’s privacy and security requirements as a covered health care provider.
For more information, see EBIA’s Self-Insured Health Plans manual at Section XI.E (“Trends in Self-Insured Health Plan Design”). See also EBIA’s ERISA Compliance manual at Section VI.I (“Other Regulatory Exemptions”), EBIA’s COBRA manual at Section V.C (“Examples of Group Health Plans”), and EBIA’s HIPAA Portability, Privacy & Security manual at Section VI.F (“Excepted Benefits: Certain Health FSAs, Dental, Vision, and Others”).
Contributing Editors: EBIA Staff.