Q-1. What is the definition of “small group” as of January 1, 2016?
A. Under New York law and the Patient Protection and Affordable Care Act (ACA), the definition of “small group” will be 1-100 employees as of January 1, 2016. See Q-6 thru Q-11 below for who is an employee.
Q-2. Will New York adopt the ACA definition of “small group” as of January 1, 2016?
A. Yes. All non-grandfathered groups with 1-100 employees renewing on or after January 1, 2016 must be issued small group coverage.
Q-3. Will New York adopt the Department of Health and Human Services “transitional policy” (available athttp://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/transition-to-compliant-policies-03-06-2015.pdf) permitting groups with 51-100 employees to retain their existing large group coverage for an additional plan year after January 1, 2016?
A. No. Allowing groups with 51-100 employees to choose whether or not to enter the small group market could allow for adverse selection, which would have a negative impact on small group premiums. Therefore, all non-grandfathered groups with 1-100 employees renewing on or after January 1, 2016 must be issued small group coverage.
Q-4. Do the guaranteed renewability provisions of the ACA allow an employer to keep its current coverage if it is reclassified as a different size group?
A. No. Pursuant to 45 C.F.R. 147.106(h), guaranteed renewability rights do not allow a group to continue its existing coverage if it would not otherwise be permitted to enroll in such coverage per federal law. Consequently, any group experiencing a reclassification as a large or small group on renewal is required to be issued coverage appropriate for that size group.
Q-5. Should groups with 51-100 employees which are covered under a large group policy in 2015 be issued small group policies on their renewal date occurring on or after January 1, 2016?
A. Yes. Pursuant to Insurance Law §§ 3231(a)(1) and 4317(a)(1) all groups with 1-100 employees renewing on or after January 1, 2016 must be issued small group coverage. This includes 2015 calendar year policies.
An insurer is required to provide the group policyholder with at least 30 days prior written notice of nonrenewal of the large group policy due to the group ceasing to meet the requirements for a large group. If a longer notification period is provided for in the group policy, an insurer must provide notification within the contractual time frame. However, in all cases, insurers are encouraged to provide at least 45 days prior written notice. See Insurance Law §§ 3221(p)(2)(E) and 4305(j)(2)(E); 11 NYCRR 52.18(c)(1).
An insurer is not required to send notification of proposed rate adjustments to a group not currently covered under a policy that is subject to the rate adjustment notification requirements of Insurance Law §§ 3231(e)(1) and 4308(c).
If an insurer writes coverage in the small group market, it must offer the 51-100 group policyholder the option to purchase all other comprehensive hospital/medical coverage currently being offered by the insurer in the small group market. In addition to offering all of its available coverages, an insurer may opt to designate or automatically assign a default replacement policy that is the most similar to the group’s existing large group coverage. Groups must be provided with the option to opt-out of the designated replacement policy and choose another policy.
If an insurer does not write coverage in the small group market, it does not have an obligation to replace the terminated large group policy with a small group policy. In such case, the notice of nonrenewal should:
- advise the group policyholder of its options to purchase small group coverage through the New York State of Health’s Small Business Marketplace (“the Marketplace”) or directly from another health insurer or through a broker; and
- may also designate or automatically assign a default replacement policy offered by an affiliate of the insurer that is the most similar to the group’s existing large group coverage. Groups must be provided with the option to opt-out of the designated replacement policy and choose another policy.
Who is an employee?
Q-6. Who is an “employee” eligible for coverage under an employer group policy or contract?
A. Pursuant to the ACA, New York adopted the federal definition of employee in Insurance Law § 4235(d). Common law employees who are “employees” as defined in 42 U.S.C. 300gg-91(d)(5) are eligible for coverage.
Q-7. Who is a common law employee?
A. Generally, anyone who performs services for an employer is an employee if the employer can control what will be done and how it will be done. The common law test to determine control would look at behavioral control, financial control and the type of relationship between the parties. An “employee” does not include the sole owner of a business or a spouse of the business owner. More information on determining who is a “common law” employee is available at on the IRS website at http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Employee-Common-Law-Employee andhttp://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee.
Q-8. Are 1099 workers (i.e. independent contractors) considered employees eligible to be covered under an employer’s group policy or contract?
A. All individuals who are “employees” as defined in 42 U.S.C. 300gg-91(d)(5) may be covered by a group policy or contract. Insurers may not prohibit a “1099 Employee” from being treated as an employee eligible for coverage. U.S. Department of Labor regulations and the Internal Revenue Code apply a common law definition of employee based on a case-by-case factual analysis. Department of Financial Services Office of General Counsel opinions on coverage for independent contractors are available at http://www.dfs.ny.gov/insurance/ogco2005/rg051117.htm andhttp://www.dfs.ny.gov/insurance/ogco2008/rg081001.htm.
Q-9. Are leased employees eligible to be covered under an employer’s group policy or contract?
A. Whether a leased employee is eligible for coverage should be made on a case-by-case basis. If the leased employees are “employees” of the lessee as defined in 42 U.S.C. 300gg-91(d)(5), then they will be considered employees of the lessee.
Q-10. Will individuals who were previously covered under an employer group policy be permitted to stay on that policy if they are not considered “employees” of the policyholder?
A. Individuals who were previously covered under a group policy but are not considered a common law employee are not eligible to be covered on the group policy when such policy is renewed on or after January 1, 2016, except for COBRA participants, retirees and owners. These individuals may be eligible for conversion coverage pursuant to the terms of their policy.
Q-11. Do employees need to be United States citizens to be eligible for coverage?
A. No. All employees who are “common law” employees as defined in 42 U.S.C. 300gg-91(d)(5) are eligible for coverage regardless of whether they are U.S. citizens.
Group Size Determinations/Counting Methodology
In determining group size an insurer shall ask and may rely upon the information provided by employers, including appropriate tax documentation.
Q-12. How should employees be counted when determining group size?
A. The “full-time equivalent” (FTE) employee counting method in 26 U.S.C. 4980H(c)(2) must be utilized to determine group size. This method is the same calculation used to determine employer liability under the “Shared Responsibility for Employers” provisions of the ACA and Internal Revenue Code.
Q-13. How should part-time employees be counted when determining group size?
A. When determining the employer’s group size, part-time employees should be counted using the FTE counting method in 26 U.S.C. 4980H(c)(2).
Q-14. Should part-time employees of an employer be counted towards group size if they are not being offered coverage by the employer?
A. Yes. Part-time employees are counted using the FTE counting method in 26 U.S.C. 4980H(c)(2).
Q-15. What period of time is considered when determining group size?
A. Pursuant to 42 U.S.C. 18024(b), group size is determined based on the average number of employees employed by the employer on business days during the preceding calendar year.
Q-16. How should group size be determined for an employer group that was not in existence in the previous calendar year?
A. Pursuant to 42 U.S.C. 18024(b)(4)(B), the calculation of group size is based on the “average number of employees the employer is reasonably expected to employ on business days in the current calendar year.”
Q-17. Do fluctuations in the number of employees during a group’s plan year change what market the group is in?
A. No. Mid-year fluctuations in the number of employees do not affect a determination of group size. Pursuant to 11 NYCRR 360.4(j), group size is only determined on issuance and at the time of renewal.
Q-18. Are retirees included when determining group size?
A. Generally, retirees are not “employees” under 42 U.S.C. 300gg-91(d)(5) and thus not counted in the group size. However, exceptions should be considered on a case-by-case basis under 42 U.S.C. 300gg-91(d)(5).
Q-19. Are individuals enrolled in COBRA included when determining group size?
A. Generally, individuals enrolled in COBRA are not “employees” under 42 U.S.C. 300gg-91(d)(5) and thus not counted in group size. However, exceptions should be considered on a case-by-case basis under 42 U.S.C. 300gg-91(d)(5).
Q-20. Are employees who are receiving coverage through another source (e.g. spousal coverage, VA coverage) included when determining group size?
A. Yes. Regardless of whether an employee has coverage through another source, an employee as defined in 42 U.S.C. 300gg-91(d)(5) will be included when determining group size.
Q-21. When an employer designates different classes of employees for purposes of health insurance coverage as permitted by the Insurance Law, are all classes combined for purposes of counting employees?
A. Yes. For example, union employees are counted together with other employees in determining group size.
Q-22. If two or more corporations are under common control, are the employees of each corporation counted separately or combined?
A. All entities treated as a single employer under 26 U.S.C. §414(b) are treated as one employer and all employees are counted together to determine group size.
Q-23. When companies merge, combine, and/or consolidate into a single company, how is group size calculated?
A. Group size determinations must be made on a case-by-case basis. The facts of each case should be reviewed to make a reasonable determination of group size.
Q-24. How many common law employees must be enrolled for coverage to be considered group coverage?
A. For a group health plan to be considered a “group health plan” under the Employee Retirement Income Security Act (ERISA), there must be at least one common law employee enrolled. Pursuant to 29 C.F.R. 2510.2-3(b), an “employee benefit plan” does not exist if no “employees” are covered by the plan. Pursuant to 29 C.F.R. 2510.3-1 and 29 C.F.R. 2590.732(d) an “employee” does not include the sole owner of a business or a spouse of the business owner.
Q-25. Will groups with 51-100 employees be permitted to purchase stop-loss insurance?
A. Insurance Law §§ 3231(h) and 4317(e) prohibit the sale of stop-loss insurance to any group subject to community rating. These sections are extended to groups with 51-100 employees beginning on issuance or renewal on or after January 1, 2016.
2016 Actuarial Value (AV) Calculator
Q-26. How are changes in coverage necessitated due to the change in the 2016 AV calculator treated?
A. Some insurers are planning to discontinue policies that are no longer AV compliant for the existing metal tier while others plan to make cost sharing changes to keep the policy within the existing metal tier. For insurers opting to discontinue non-AV compliant policies, discontinuance notices need to be issued. Changes to keep a policy at an existing metal tier that are due solely to the mandatory application of the 2016 AV calculator will be treated as a uniform modification. Renewal notices should explain the cost sharing changes necessitated due to the application of the AV calculator and advise that plans with lower cost sharing options are also available.
Jeffrey R. Ungvary President