Column 106 - CA employers need to review waiting periods for group health plans

CA employers need to review waiting periods for group health plans

 

Small employers are often struggling with budget and benefits.  They wish to provide benefits for their employees, but have to struggle with the cost to do so.  One common mistake many small employer make is to set eligibility for benefits at greater than 30 hours per week. 

The rules are quite clear that 30 hours per week is the maximum eligibility period for most insurers plans.  A small employer might want to define full time as 32 hours or even 40, but it is simply not allowed.  Fortunately for most employers the insurers do not have the resources to audit the groups.

However, as we approach the renewal season, employers may want to consider changing carriers. This is when it can bite the employer!  The insurance company will want a copy of the DE9, California payroll tax return.  The application will be balanced to this return.

This means that all employees must be accounted for by either enrollment or waiver forms or indicating that the employee does not work enough hours.  The insurer may ask the employer to provide pay stubs to verify the number of hours the employee works and the pay rate.

Some balancing issues can address the reverse issue.  The DE9 may spark question that an eligible employee does not work enough hours to be eligible.  Perhaps in the last quarter they were out sick or on unpaid leave.  All of this must be justified. 

Insurer participation requirements can vary from a low of 25% of those eligible, to as high as 70% of eligible employees.  This is the percentage of employees that must participate in order to have a bona fide group for employee benefit purposes.

Qualified waivers for other group coverage (i.e. under a spouse's plan) or social insurance programs such as MediCAL or Medicare typically do not count against the group.  Individual coverage enrollment does count against the group.

Some employers may wish to be more generous and offer coverage to employees working part-time; as few as 20 hours per week.  The employer is typically required to pay the same percentage or share of cost toward the employees' premium, so this can get rather pricey.  Further, if the employee is working part-time, wages are typically lower, so they may be unable to pay their share of premium.  This could affect the group's eligibility in terms of participation.  So proceed with caution in offering benefits to part-time employees.

At renewal, you may wish to consider changing to a longer waiting period for newly eligible employees to participate.  You may recall that last year, the state of CA wanted to "one-up" the federal rules and said that employees could wait no longer than 60 days to begin benefits.

Since some months have 31 days, that effectively made the employees eligible on the first of the month following 30 days of employment.  At renewal in 2015 your carrier will have other options for you.  You may also avail your group of the 30 day "orientation" period under the ACA, which can make the waiting period as long as 90 days again.  For example Blue Shield of CA allows 90 days after date of hire with coverage effective on the 91st day (counting date of hire. 

But this can be messy for an administrator that is preparing payroll deductions as premiums may need to be pro-rated.  We have found that most small employers are using first of the month following 30 or 60 days of employment to make their lives easier. In addition it makes it easier to explain benefits to the employees.  It's difficult to have multiple "hire dates" to manage for multiple purposes.

Just one more thing to add to your renewal discussion checklist!!