FAQ's Employer & Employee Eligibility & Participation
Q: Are employers required to provide insurance to their employees?
The new health care law, the Affordable Care Act, does not require small employers to offer health care coverage. Employers with 1-50 eligible employees will not be subject to penalties for not providing health coverage. However, there are many advantages to the employer. These include: Employee Loyalty & Retention, Productivity, Tax Advantages, Budget Control, and Aggregate Billing. An Option would be to conduct an enrollment workshop at your job site.
Q: What is an eligible employee?
An eligible employee works an average of 30 hours per week based on a month of work. You may decide to offer coverage to part-time employees who work between 20 and 29 hours per week. Ask your Certified Insurance Agent for a complete list of eligibility guidelines.
Q: What happens if I do not cover my employees?
Businesses with 50 or fewer eligible employees are not subject to penalties if they do not provide health coverage to their employees. Businesses with greater than 50 eligible employees are not subject to tax penalties for the 2014 tax year.
Q: How much does health insurance cost the small business owner?
The employer cost of offering health insurance depends on several choices the employer will make. These include:
- The level of coverage – bronze (60%), silver (70%), gold (80%), or platinum (90%) -offered to the employees. This is known as the “tier” or “metal tier”.
- The “Anchor Plan” or sometimes referred to the “Benchmark Plan” the employer chooses to base their contribution on. Employers will choose a specific plan within their chosen metal tier to tie their contributions to.
- The percent of premium the employer chooses to contribute to employee premium costs as a percent of the cost of the anchor plan.
- The amount the employer chooses to contribute to dependent coverage (if offered).
Q: How much is a small business owner required to contribute to employee premiums?
To participate in Covered California's SHOP, employers must contribute a minimum of 50 percent of employee-only premium amount of their selected anchor plan (or reference plan).
Q: Are employers able to have different contribution levels within their selected metal tier based on employee classification? In other words, can an owner pay 100% for owners and management and 60% for all other employees? No.
Q: Is the employer contribution defined as a dollar amount or as a percentage of the plan?
The amount of premium the employer contributes is a percent of the premium.
Q: Can the employees choose any health plan in Covered California's SHOP?
Small Businesses that want to offer coverage through SHOP will not sacrifice employer control. As a small business owner, you will select the level of coverage you want to offer employees and, within that level, employees then choose which Qualified Health Plan best meets their needs.
Q: How much do employees pay for coverage?
The employee’s cost depends on the level of coverage the employer chooses and the plan the employee selects. As part of the Affordable Care Act, all health plan offerings are classified into one of four levels based on their actuarial value. This term refers to the share of health care expenses the plan covers for a typical group of enrollees. The four levels or tiers of coverage - platinum, gold, silver and bronze – in part, determine the amount of premium the employees will be responsible for.
The employer determines the coverage tier in which the employees must choose plans. As the plans increase in actuarial value, they cover a greater share of medical expenses overall. In the lowest tier plan, bronze, employees would pay about 40 percent of their health care expenses through cost sharing such as deductibles, coinsurance and copays. In the highest tier plan, platinum, employees would pay about 10 percent of the expenses.
Q: Who handles all the complicated insurance details?
Covered California handles enrollment and ongoing eligibility, including renewals, for both the individual and SHOP exchanges. In addition to those tasks, Covered California also handles premium billing and collection and agent commission payments for policies sold through SHOP. In SHOP, the small business owner makes a single payment to Covered CA for the premium cost.
Q: Are small groups consisting of only owners, spouse, or partners eligible for group coverage in the SHOP? For example, would a small business owner who is in a partnership with his wife, with no employees, being eligible?
Beginning January 2014, there must be at least one W-2 wage earner in the small group to be an eligible small group for the purposes of SHOP eligibility. According to ERISA, there must be a common law employee to constitute the group as a small business.
Health Law: Health & Safety Code 1357.500(k)(2) specifies that a small employer in California is defined consistently with ACA Section 1304 in plan years beginning on or after January 1, 2014 for purposes of determining whether an employer with one employee may include sole proprietors, certain owners of S corporations, or other individuals. In turn, the federal regulation under that section defines "employer" and "employee" by reference to PHS Act Section 2791.45 and CFR 155.20. That section relies on the definition of "employer" and "employee" from ERISA sections 3(5) and 3(6), respectively. 42 USC 300gg-91(d)(5),(6).
The ERISA regulations at 29 CFR 2510.3-3(c) say that
- An individual and his or her spouse shall not be deemed to be employees with respect to a trade or business, whether incorporated or unincorporated, which is wholly owned by the individual or by the individual and his or her spouse, and
- A partner in a partnership and his or her spouse shall not be deemed to be employees with respect to the partnership.
This is consistent with the federal final rule on the Establishment of Exchanges, issued March 27, 2013, which states that to be an employer eligible for the SHOP, the employer must employ at least one common law employee.
Q: Can a self-employed person purchase insurance from Covered California?
Yes, in the individual exchange.
Q: What does Minimum Essential Coverage mean?
Minimum essential coverage satisfies the individual mandate for coverage. Coverage does not have to include essential health benefits to be minimum essential coverage. It is defined as:
- Coverage under certain government-sponsored plans
- Employer-sponsored plans, with respect to any employee
- Plans in the individual market
- Grandfathered health plans
- Any other health benefits coverage, such as a state health benefits risk pool, as recognized by the HHS Secretary
Minimum essential coverage does not include health insurance coverage consisting of excepted benefits, such as dental-only or vision-only coverage.
Q: Who will be responsible for COBRA compliance and notifications?
Employers subject to Federal COBRA will continue to administer that on their own. SHOP will take over the tasks relegated to issuers as their delegated entity.
Q: Is the 60-day waiting period the first of the month after 60 days or is it the 60th day? 60th day.
Q: What if the small employer has more than 50 employees?
If the small employer has more than 50 eligible employees but fewer than 101, the small employer will be able to buy insurance through Covered California starting in October 2015 for coverage that begins in 2016. Meanwhile, the employer with more than 50 eligible employees can continue to buy health coverage in the private marketplace.
Q: How does Open Enrollment differ between the individual market and SHOP?
The individual market has a set time every year for open enrollment, much like Medicare, where new and renewing members can enroll. If that window of time is missed, the person must wait until the next open enrollment period to get coverage unless a qualifying life event occurs that allows for a special enrollment right. The SHOP allows new groups to enroll throughout the year with effective dates on the first of every month.
Q: If an employee loses coverage from their employer, can they purchase individual coverage on a guaranteed issue basis from the Exchange, or, will they first have to exhaust there COBRA coverage.
Yes, you can purchase insurance in the Individual Exchange. You do not need to exhaust COBRA benefits first.
Q: If an employer does not provide health coverage, can the employee go to the individual exchange? Can they get a subsidy if they qualify?
Yes, you can purchase insurance in the Individual Exchange and if you qualify, can receive a subsidy.
Q: If the Small Employer offers coverage, what are the requirements?
In order to offer coverage to their employees through SHOP, small employers must meet certain eligibility criteria. The most important are the participation requirement, which is 70%, and the contribution requirement, which is at least 50% of the employee-only premium cost of the anchor plan chosen by the employer.
Q: Can an employer select any plan in a specific tier and designate that plan as their anchor which will set the contribution 50%? Yes.
Q: What if the small employer does not offer "affordable" health coverage? Can an employee obtain coverage in the individual market and does this constitute a waiver for the employee in the individual market? Does it constitute a waiver for the employer towards their participation?
All employees are free to purchase coverage in the individual exchange. There is no law or mandate that requires employees to accept employer coverage. This is true regardless of the affordability of the employer's offer of coverage. If the employee qualifies, he or she may receive a subsidy in the individual exchange, but that qualification is dependent, in part, upon the employer's offer of affordable coverage. Any coverage in the individual market, whether in the Exchange or outside the Exchange, whether subsidized or not, does not constitute a valid waiver toward employer participation requirements.
Q: What happens when an employer has employees in multiple States? Is there a minimum # of employees required to live in CA? Is the employer required to write coverage with each State?
Eligible employers must have a minimum of 51% of its employees reside in California. Federal regulations require that employers with employees in other states be allowed to choose to cover those employees in the SHOPs established in those states.
Q: Do out of state EE's count as valid waivers for the employer? Yes.
Q: If a small group renews 9/1/13 and wants to move to the SHOP effective 1/1/14, are they able to do this? Yes.
Q: If a small group enrolls with a group size initially of 45 employees in SHOP, what happens if this group grows to over 50?
By Federal Regulation, groups cannot be terminated or not allowed to re-enroll based upon the group growing to a size bigger than what was allowed at initial eligibility.
Q: Will participants (group and/or individual) be allowed to change their initial plan choice every year? Or are they stuck with the plan they initially choose for a specific time period?
Yearly open enrollments allow for these types of changes.
Q: Does the 60 day max waiting period mean that a group with "1st of the month following" for coverage to be effective will need to have a 30 day waiting period to avoid exceeding that 60 day maximum? Yes.
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