By Paul Routh of Dunlevey, Mahan & Furry
There have been three major changes with respect to fully insured group health plans in Ohio. The first two modifications are legislative changes that bring Ohio in line with the Federal rules and the final one is a change in the Ohio Department of Insurance's position on spousal coverage. The Federal government also issued some transitional relief for small employers. You need to know about these changes and ensure your plan is in compliance.
1. Ohio Now Permitting Spousal "Carve Outs" To Save Employer Expenses
A spousal "carve out," as opposed to a "spousal surcharge," is when the employer precludes the employee’s spouse from enrolling in the group health plan if the spouse is eligible for another group health plan (i.e. a group health plan sponsored by the spouse’s employer). A spousal surcharge, on the other hand, is when the employer simply charges the employee more to cover his or her spouse if the spouse has access to another group health plan. For example, the employer may tell the employee it will cost the employee $ 100 per month to cover his or her spouse but, if the spouse has access to another group health plan, it will cost the employee $ 175 per month to cover his or her spouse.
The Ohio Department of Insurance precluded insurance companies from offering a group health plan that had a spousal carve out. Therefore, employers sponsoring a fully insured health plan could not implement a spousal carve out; their only option was to impose a spousal surcharge. The Ohio Department of Insurance has changed its position and is allowing insurance companies the option of offering fully insured health plans with a spousal carve out. So, you should contact your insurance company if you want to implement a spousal carve.
Note, you cannot simply adopt an internal policy imposing the spousal carve out. You have to have the insurance company implement that provision. The Ohio Department of Insurance is allowing insurance companies to offer these types of policies but it is up to each carrier whether or not they want to offer these types of products. Again, spouses that lose coverage due to a spousal carve out will not be eligible for COBRA coverage because there is no qualifying event.
Under all three changes, individuals will lose health coverage. Even though they may not be eligible for COBRA coverage, they (and their spouses and dependents) will have the opportunity to enroll in their employer’s group health plan. Federal law allows individuals to enroll in their employer’s group health plan mid-year, assuming they are otherwise eligible to participate in that plan, whenever there is a “special enrollment period.” As a general proposition, a loss of eligibility in a group health plan for almost any reason creates a special enrollment period. So individuals who lose their health coverage because of these three changes will probably have the right to enroll in another group health plan immediately upon losing their coverage and they will not have to wait until the next open enrollment period.
2. Employer's Payment for Individual Health Policies Ending
The Federal government has issued a number of rulings saying employers cannot pay for or reimburse employees for individual health policies. That is, employers cannot, directly or indirectly, pay for the employee’s individual premiums on either a pre-tax or post-tax basis. Employers that violate this rule are subject to a $ 36,500 per year per employee penalty!!!!
The Federal government just issued transitional relief that allows small employers (i.e. those with less than 50 full time and full time equivalent employees) to pay or reimburse employees’ premiums for individual health policies until June 30, 2015. Note, this relief is only for small employers and only until June 30, 2015.
So, larger employers are currently subject to the $ 36,500 annual per employee penalty and starting July 1, 2015, small employers will become subject to the penalty.
3. "Eligible Employee" For Mandatory Coverage Increased To 30 Hours Per Week
Ohio requires small employers sponsoring fully insured health plans to offer coverage to “eligible employees.” Eligible employee is defined as an employee that works, on average, at least 25 hours per week. The hour requirement in this definition is going to change to 30 hours per week. This change, which is effective for plan years beginning on or after January 1, 2016, brings Ohio law into line with the Federal statute. That is, health care reform defines a full time employee as one that works at least 30 hours per week.
Note that this change applies to small employers in Ohio. A small employer is defined as an employer that had between 2 and 50 employees during the previous calendar year. As a side point, once the change kicks in, employees that worked more than 25 hours or more but less than 30 hours will lose their health coverage. However, they (and their family members) will not be entitled to COBRA coverage because there is no qualifying event. Remember there has to be an enumerated event that causes the loss of coverage for COBRA to apply. In this case, there is no qualifying event which means there is no COBRA coverage!!!!
4. Definition of Dependent Child Changed To Age 2
Ohio law currently requires employers sponsoring fully insured health plans to offer coverage to unmarried children up to age 28 if the child lives in Ohio or is a full time student who is not eligible for another group health plan, Medicare or Medicaid. For plan years beginning on or after January 1, 2016, the age is lowered from 28 to 26. This brings the Ohio rules in line with Federal law. This change applies to all size employers sponsoring fully insured health plans in Ohio.
The COBRA rules with respect to this change are less clear. Those rules say you have to offer COBRA coverage when a dependent loses dependency status under the terms of the plan. The COBRA rules contemplate a child attaining a certain age and losing coverage rather than a plan amendment that results in a number of children becoming ineligible for coverage. Therefore, you need to contact your insurance carrier to determine if you should offer COBRA coverage to those dependents that lose health coverage as a result of the change.
Paul Routh is a Director at Dunlevey, Mahan & Furry and heads the Benefit Group. Visit their website at www.dmfdayton.com. DM&F sponsors the Legal Services Plan available to all members. Contact Bob Dunlevey at (937) 223-6003.