Some smaller employers continue to struggle with the requirement to provide health insurance for their employees with insurance enrollment requirements commonly called "minimum participation requirements" or "group participation rules." As they describe, these provisions require that a certain amount of the employees actually elect the coverage.
In a way, these employers find themselves between a rock and hard place. On one hand, they may find it difficult to meet these requirements and on the other hand they may be subject to a payment with the employer responsibility rules if they don't offer coverage. Please note, this concern is delayed for small employers under 100 full-time employees (and full-time employee equivalents) until 2016 provided they meet the "certification" requirements in the final employer responsibility rules.
While insured plans in the large group market can't deny enrollment due to minimum participation requirements, for the small group market, these requirements may be used outside of annual enrollments. The minimum participation requirements help to prevent adverse selection concerns if small plans are allowed to begin coverage whenever they want. The solution may be found with the final HHS rules released in February 2013 which provide a "special one month window” each year.
- HHS stated in the final rules preamble “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.”
- HHS final regulations at 147.104(b)(1): “In the case of health insurance coverage offered in the small group market, a health insurance issuer may limit the availability of coverage to an annual enrollment period that begins November 15 and extends through December 15 of each year in the case of a plan sponsor that is unable to comply with a material plan provision relating to employer contribution or group participation rules. . . .”
The February 2014 final regulations on the employer responsibility requirements also responded to comments on this issue, confirming the required one month window for enrollments without minimum participation requirements.
- "Commenters expressed concern about potential liability under section 4980H in the case of an applicable large employer that cannot obtain or maintain coverage for its employees because the employer cannot satisfy a health insurance issuer’s minimum participation requirements. In the large group market, a minimum participation requirement cannot be used to deny guaranteed issue. For small employers, such as relatively small applicable large employers, final regulations issued by HHS provide that an issuer must guarantee issue coverage to a small employer during an annual, month-long open enrollment period regardless of whether the small employer satisfies any minimum participation requirement."
If you need assistance understanding these rules, please contact Kinney & Larson.