As an employer trying to get medical coverage for employees, you may find yourself coming across minimum participation rules for health coverage. Minimum participation rules can be described as a percentage of your eligible employees who must choose coverage. These limits are often done to prevent adverse selection--or the case where only the sick people in the population choose the coverage. Put another way, insurance is rated for sick and healthy participants contributing into the pot, if only the sick people choose it, rates can look very different and a carrier may not want to offer such coverage.
Each carrier may have its own version of minimum participation requirements but most if not all include a majority of the eligible employee population. This can be difficult for some employers, especially those with lower paid employees or employees who are younger and do not envision much medical care in their future. Asking some employees to take two hundred dollars a month out of their paycheck can prove challenging, even with the individual mandate.
A little known fact is that the Affordable Care Act (ACA) changed these rules significantly in the small group and large group insurance markets for employers. The following rules may come up when dealing with a carrier who is discouraging enrollment for an employer based on size of the employee enrollment. This can happen with smaller employers and even very large employers that are attempting to obtain coverage in one particular jurisdiction in the country for a smaller employee count.
The new federal rules require available insurance entities to provide coverage in the large group market, even mid-year--and that coverage cannot be prevented by minimum participation or minimum contribution rules. In the small group market, insurance entities cannot enforce these limits during a special one month window of November 15th through December 15th each year. This is mandated under the “guaranteed availability” or “guaranteed issue" rules of the ACA §1201, which amended §2702 of the Public Health Services Act. Some regulatory guidance includes the following:
In the final rules released in February 2013 on this issue, HHS stated in the 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 also state 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. . . ”
Also in February 27, 2013, HHS seemed to say in their comments to the final health insurance market rules that while open enrollment and special enrollment periods are still allowed, the ACA §2702 contains no exception to guaranteed availability based on a failure to meet minimum contribution or minimum participation requirements. See §2702(b)(1).
In addition, the Department of Treasury February 2014 final regulations on the employer responsibility requirements responded to comments on this issue, confirming that minimum participation should not prevent employers from offering health coverage:
"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.”
Lastly, informal comments from HHS seems to say that premium pricing which is set too high or excessive (possibly because of very low participation) can also be viewed as a way to prevent coverage and consequently run afoul of these rules.
A separate rule is also found under ACA §1201, which amended §2703 of the Public Health Services Act and provides that coverage must be renewed under certain conditions each year. Technically, the rules around guaranteed renewal appear to be different from guaranteed issue when reading the statute and regulatory guidance. This means an insurance carrier may not have to renew coverage for failing minimum participation or contribution rules at the end of the coverage year. However, it seems to be the position of HHS that each plan option of the carrier is subject to guaranteed issue (above) so a carrier with multiple plan options may have to allow enrollment into a separate option(s) if this loophole is used to cut off coverage at renewal. Often the difference between options is nothing more that a change in deductibles or copay.
OTHER NONDISCRIMINATION RULES:
Last but not least, carriers must avoid discriminatory marketing practices or benefit designs that can be construed as a failure to comply with the guaranteed availability requirements. In response to comments, HHS revised 45 CFR § 147.104(e) of their final rule "to make clear that a health insurance issuer and its officials, employees, agents and representatives must not employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of certain individuals in health insurance coverage." This applies to insurers in the group or individual market and prevents discrimination based on the degree of medical dependency or other health conditions. This standard is also tied into the prohibition on discrimination with respect to essential health benefits in 45 CFR §156.125, the non-discrimination standards applicable to qualified health plans in the Marketplace identified under 45 CFR §156.200(e), and the marketing standards for qualified health plans found in 45 CFR §156.225.
These rules can be complicated, if you need assistance with these rules or the ACA generally, please contact Kinney & Larson LLP.