Suppose a business wants to offer group insurance to its employees, but is afraid they can’t get enough employees to participate in the plan to meet the insurance company participation requirements. (Typically the insurer will require around 65-70% of those eligible must participate in the plan.)
An important option is created by the Affordable Care Act (ACA) that creates a special enrollment period.
The Special Enrollment Period (SEP) runs November 15 through December 15 of each year. During this one month period only, small businesses that are not able to meet participation or contribution requirements will be allowed to enroll for coverage regardless of participation. The coverage will be effective January 1.
An important note: Small businesses applying for coverage during the annual enrollment period are not subject to a minimum participation or contribution requirement, but these requirements will apply at renewal. Outside of this period, the minimum participation and contribution requirement apply.
So now is the time for groups to explore this option.
Since smaller employers (with under 50 employees) are not subject to the mandate to offer coverage there is no employer penalty if they do not offer coverage. However, some small employers are in a tough position. They want to provide benefits for their employees but they do not want to penalize them by offering benefits.
This is the “catch” in the ACA. It states that if parent or spouse is offered “affordable coverage”, the entire family is not eligible for a subsidy on the individual Exchange. “Affordable” is defined as the employee only share of cost that does not exceed 9.5% of the employee’s W-2 income with that employer.
Traditionally employers will pay 70-100% of the employee-only premium and little or none of the dependent premium. This often simply makes the employee ineligible for subsidized coverage on the Exchange for the rest of the family.
If the demographics work, a small firm might be able to implement a rich benefit package designed for the key employees, while still not making the plan “affordable” for the lower paid employees, thus allowing them to go to the Exchange for subsidized coverage.
In general this will work best with a younger population of key employees and older workers in the lower income brackets. Most employers have a fairly diverse work force, but that doesn’t mean it’s not worth exploring.
First review the compensation of your employees and calculate the 9.5% of W-2 income. As you review this list, you can see where the employee contribution needs to be set in order to disqualify the plan as affordable. That is above the 9.5% of W-2 income.
Secure proposals for insurance plans with detailed rates for the employees. Review the rates vs. the threshold to see what plans might work for your group.
It may be necessary to adjust compensation for some of the key people to allow them to pay the premiums. If the employer uses a Section 125 plan to allow pre-tax premium payments for insurance, and the employee defers the additional compensation to the premium, the net effect to the key employee and employer could be almost zero.
It’s critical to note that these salary adjustments cannot be tied to the benefits plan in any way. They cannot be conditional on applying the increase to insurance. Further, once a raise is given, it’s pretty hard to take back.
Social Security numbers required by Group Insurers
If your insurer is requesting social security numbers for all of the individuals covered on your group health insurance plan, do not be alarmed. It is not a scam. In prior columns we have discussed the required reporting for the ACA. Small employers are not required to do this reporting, but the insurance company is required to do so.
Therefore it is required that they collect this information to submit the required forms for the government as well as to the employee. It helps everyone when the information is provided in a timely manner.
Automatic enrollment repealed
On November 2, 2015, the Bipartisan Budget Act of 2015 was signed. It included language that repealed Section 18A of the Fair Labor Standards Act, enacted as part of health reform. This section required employers with 200 or more full-time employees to automatically enroll new full-time employees in an employer health plan as well as continue the enrollment of current employees in the health plan offered. While there was a requirement that they employees be given adequate notice and an opportunity to opt-out of the employer health plan, there were concerns about how this would be administered.
Employers were not required to comply with the requirements until final regulations were issued. Since this repeal came before the final regulations were issued, employers will not have to comply. This is likely a relief for those with 200+ employees.
