What if you build it and NOBODY comes? What happens if you offer health insurance coverage to your employees and only a few take it? Will you be penalized?
Many Large/Small employers are sweating whether insurance companies will allow them to have a plan if they don’t meet participation guidelines (roughly a minimum of 50% of employees must enroll for coverage or else the insurance company will NOT offer coverage – it’s more complex than that, but good enough this post).
The short answer is that if you are a small employer, the answer is YES you will be able to offer coverage without meeting participation guidelines, BUT open enrollment will ONLY be November 15 through December 15th for a January 1st start date. If you do meet the insurance company participation guidelines, you can have any renewal date you choose (just like it is now).
What about large employers who have less than 50 employees who want coverage? I have a client who has 268 full time employees, but only 16 will take the coverage. Will they be penalized? The answer is “we don’t know.” The National Association of Health Underwriters is working with HHS to come up with rules surrounding this occurrence. My best guess is that there will be something just like what will happen for a small group (above). Of course if you can be creative with “Standard Measurement Periods” and the “Look Back Period” you may be able to say to an insurance company that you only have 16 employees eligible for coverage. Most insurance companies at this point would consider the group a “small employer group” as they’d only recognize the 16 employees as full time eligible (and meet the participation guidelines).
Now let’s say that out of the 16 eligible, only 2 want the insurance (meaning you DON’T meet the guidelines). They would not be allowed to have the November 15th – December 15th open enrollment period because this special “Open Enrollment” period due to lack of participation would most likely be done only within the SHOP (small employer group health insurance) Exchange.
As it is in the Exchange, the Government would not allow this particular group to shop in the exchange because, according to the ACA formula, they are a “large group employer.” See the very last sentence of this blog post as to why I say this.
Companies with 50+employees who take coverage have more flexibility when it comes to getting insured. Some insurance carriers will say 20% participation (with a minimum of 50 taking coverage) is okay.
Ultimately, this is another thing that was unforeseen by the lawmakers which needs to be resolved.
The following excerpt is from the Federal Register, Vol 78, No. 39/ Wednesday, February 27, 2013/ Rules and Regulations, page 13416. Here is a link from the state of Kentucky or you can google it yourself. http://healthbenefitexchange.ky.gov/Documents/Guaranteed%20Availability%20of%20Coverage.pdf
Comment: We received a few comments about the proposal that issuers would be allowed to decline to offer coverage to small employers for failure to satisfy minimum contribution or group participation requirements under state law or the SHOP standards.
Several commenters expressed support for the policy and recommended extending it to the large group market. One commenter emphasized that minimum participation and contribution standards must be reasonable and not burdensome to the point that small employers are discouraged from offering coverage.
Response: Upon further consideration of this issue, we have determined that small employers cannot be denied guaranteed availability of coverage for failure to satisfy minimum participation or contribution requirements.
As in the case of the bona fide association exception discussed above, while Congress left in place an exception for failure to meet contribution or participation requirements under the guaranteed renewability requirement in section 2703(b), it provided no such exception from the guaranteed availability requirement in section 2702.
To the contrary, language in the guaranteed availability provision for group health plans that was in place before the Affordable Care Act was not included in section 2702.
Accordingly, the proposed approach would conflict with the guaranteed availability provisions in section 2702 of the PHS Act. Moreover, permitting issuers to deny coverage altogether to a small employer with between 50 and 100 employees based on a failure to meet minimum participation or contribution requirements could subject such employer to a shared responsibility payment under section 4980H of the Code for a failure to offer coverage to its employees.
While section 2702 contains no exception to guaranteed availability based on a failure to meet contribution or minimum participation requirements, section 2702(b)(1) permits an issuer to limit enrollment in coverage to open and special enrollment periods.
Under our authority in section 2702(b)(3) to define ‘‘open enrollment periods,’’ we are providing in this final rule that, in the case of a small employer that fails to meet contribution or minimum participation requirements, an issuer may limit its offering of coverage to an annual open enrollment period, which we set forth in this final rule as the period beginning November 15 and extending through December 15 of each year.
As such, the group market will have continuous open enrollment, except for small employers that fail to meet contribution or minimum participation requirements, for which the enrollment period may be limited to the annual enrollment period described above, from November 15 through December 15. This approach addresses concerns about adverse selection in a manner that is consistent with the statutory provisions. We do not extend this provision to the large group market because large employers generally do not present the same adverse selection risk as small employers.