Healthcare Reform: Plan Eligibility Rules Need To Be In Writing

January 26 - Posted at 3:00 PM Tagged: , , , , , , ,

Healthcare Reform continues to roll on despite all of its opponents. While 2014 brought the implementation of the health insurance exchanges, the Individual Mandate, and a host of new rules relating to employer-provided health coverage, 2015 marks the start of yet another major component of the Affordable Care Act (ACA): the Employer Mandate.


In the a recent article written by Fisher & Phillips LLP attorney Steven Witt, he discusses the potential risks employers can face if they are not careful in how they implement (and document) their compliance strategies with regards to the Employer Mandate.


The Employer Mandate requires large employers to offer compliant group health coverage to their “full-time employees” and their dependents or face excise tax penalties. Say you are a large employer who has never offered health insurance (or perhaps only to a small subset of your employees). You do not want to bankrupt the company and offer health insurance to your entire workforce, nor do you want to face tax penalties. Instead, you opt for what the Employer Mandate calls for: you offer health insurance coverage to only your full-time employees.


If you decide to only offer coverage to your “full-time” employees, simply setting measurement period dates with your human resources department and running payroll reports to determine who is “full-time” will not sufficiently limit the risk of controversy and potential legal liability. You will be much better off to clearly define these eligibility rules in writing and make sure any old, conflicting eligibility rules are updated.


Leaving existing plan documents and other materials (e.g., employee handbooks) to define health insurance eligibility with something vague like “full-time employees: employees who regularly work 30 or more hours per week,” is only inviting trouble. You will no doubt have employees (with attorneys) who could make plausible arguments that they “regularly” work 30 or more hours a week and can point to your existing written documents as evidence they should have been offered health insurance. Without clearly setting out new eligibility rules, it will be a much steeper uphill battle for the employer to defend itself.


On the other hand, if such employees attempt to claim that they were unfairly denied health insurance coverage, an employer should be on much stronger footing to defend its position that those employees are not “full-time” if it can point to written documentation outlining items such as (a) date ranges used for measurement periods and stability periods; (b) waiting periods for newly-eligible employees; and © how to treat employees in special circumstances, such as those who are promoted from a part-time position to a full-time position, those on a leave of absence, or rehired employees.


If you have not already done this, it is not too late. Even employers subject to the Employer Mandate in 2015 can still timely revise their SPDs or perhaps draft stand-alone benefits eligibility documents or other “wrap” documents to fully outline new eligibility rules. Steven advises employers to pay close attention as additional regulations and agency guidance continues to roll out to ensure they stay in compliance with ERISA, the ACA, and other related federal and state health insurance-related laws.

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