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.
Below is text I took that
describes the participation/open enrollment guidelines.
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.
