California Insurance Mandate and Special Enrollment Periods

In a previous column we talked about the new insurance mandate for California residents (SB78) that is effective 1/1/2020. I explained how the state of California is also adding additional subsidies to assist individuals in payment of the premiums, if they purchase coverage through the Exchange at www.Coveredca.com.

Group insurance market carriers are now offering a SEP (Special Enrollment Period) for employees who have previously declined the employer’s offer of coverage. This is being offered to allow employees to maintain compliance with the new law. This SEP is available only to employees who previously waived or declined coverage. It does not allow those that are already enrolled to make changes (unless it is also open enrollment for their group plan).

It is important that employers communicate this option to their employees in a timely manner, as applications received after the deadline will be declined. To my knowledge, there are no employer penalties for not doing so.

A new employee application must be submitted before 1/31/2020 for effective date of 1/1/2020 for most carriers. No other effective date is allowed. The applications should be submitted indicating that the qualifying event is SB78. Check with your broker for your particular company’s rules.

This deadline is the same as the open enrollment deadline for individual coverage, so anyone wanting coverage after 1/31 will need to have a qualifying life event or wait for their employer’s open enrollment period.

A reminder to readers The Franchise Tax Board indicates the penalties will be in the following range, but could be much more.

Household Size If You Make Less Than You May Pay
Individual $45, 500 $695
Married Couple $91,000 $1,390
Family of 4 $140,200 $2,085
It is best to contact your tax professional for advice.

 

There are several exemptions that may be requested on the Tax return as follows:

  • Income is below the tax filing threshold
  • Health coverage is considered unaffordable (exceeded 8.24% of household income for the 2020 taxable year)
  • Families’ self-only coverage combined cost is unaffordable
  • Short coverage gap of 3 consecutive months or less
  • Certain non-citizens who are not lawfully present
  • Certain citizens living abroad/residents of another state or U.S. territory
  • Members of health care sharing ministry
  • Members of federally-recognized Indian tribes including Alaskan Natives
  • Incarceration (other than incarceration pending the disposition of charges)
  • Enrolled in limited or restricted-scope Medi-Cal or other coverage from the California Department of Health Care Services

Covered California website may also process the following exemptions:

  • Religious conscience exemption
  • Affordability hardship
  • General hardships

Check www.coveredca.com for more information.

Please note that this is different from the Special Enrollment Period for groups that don’t meet underwriting requirements. This runs from 11/15 to 12/15 and the group would be effective 1/1. This SEP allows small groups that do not meet an insurer’s underwriting requirements a “guaranteed issue” opportunity where the insurer may not decline to insure the group. Typically this is for groups that have many employees, but not enough will participate to qualify the group.

One last reminder for this open enrollment season. Folks are often intimidated by choosing their health plan. It really isn’t that hard. It is a math exercise. If your enrollment platform does not provide a “side by side” spreadsheet option, make one yourself.

List the important features such as deductible, copay for services (Office visits, labs, tests, Rx) and the out of pocket maximum exposure for each plan and your share of premium.

Then guestimate the number of charges you will have in each category, multiply those by the copay for a total for each row. Total up your expected out of pocket cost for each plan, including premium. This will get a “best case scenario”.

Then compare the out of pocket maximum (OOP) exposure for each plan against the premium you will pay. Often you will find that you are paying more premium for the lower OOP max plan than you will be able to gain in the event of something catastrophic. Actuaries aren’t stupid. They have figured this out.

In general, the lower utilizers and the highest utilizers are best served by the Bronze plans. It’s those mid-range folks that have the trickier choice.

Soon, open enrollment will be over and we can enjoy the holidays. That is until the bills start rolling in for all that holiday cheer (wink wink).

Margaret R. Beck

Margaret Beck CLU, ChFC, CEBS started her insurance practice in Redding in 1978. She founded Affiliated Benefit Services.