Once you have your health plan in place, you’ll need to manage all the details of signing up and dropping employees. Below, we explain how to do this and the rules you need to understand.
Adding and Dropping Employees
You can add employees to the medical plan when they are hired, usually on the first of the month following date of hire, or the first of the month after completing a waiting/probationary period. Once the employee chooses a plan, it stays in effect until one of two things happens:
- Open enrollment. See below for more information.
- Qualifying status change. Go to Making Enrollment Changes below for more information.
You can drop employees from the plan at any time during the year due to:
- Termination. Layoff, firing, retirement or quitting.
- Change in hours or classification. Employees who reduce their hours so that they are no longer eligible for insurance, or who move into a classification that is not offered insurance (for instance, seasonal workers). Employees (and their dependents) who lose coverage must be offered the opportunity to continue their medical coverage at their own expense.
Laws such as COBRA govern how employers may extend medical benefits to employees after termination; in the tool box see “Laws Related to Health Insurance” for more information.
Every year, employees have the option to change their medical coverage during “open enrollment.” Open enrollment for small employers usually is the month prior to renewal date of the policy and lasts about one or two weeks. During this time employees receive plan materials, have a chance to ask questions about plan choices and enroll in a plan. They may add or drop dependents, choose a different medical plan, or sign up for new plan offerings, such as an optional chiropractic plan or dental plan.
Coverage begins at a specified date after open enrollment and usually runs for a full year. Some companies hold open enrollment in the fall, and coverage is effective from January 1 through December 31. If you want the best service from your agent or broker and the insurer, however, you may want to avoid the rush by planning your open enrollment period off-peak. For example, for a coverage year of July 1 to June 30, open enrollment would be in the spring.
Making Enrollment Changes
Employees generally can make changes to their benefit elections during the year only if they have a qualifying status change. Events that qualify as a “status change” include:
- Change of spouse’s employment/benefits
- Death of a dependent
- Death of a spouse
- Gain or loss of employment
- Legal separation
- Loss of eligibility for coverage as a result of reduction in hours, leave of absence
- Qualified Medical Child Support Orders (QMCSOs).
After the event happens, most plans give employees 30 days to notify the employer and the insurer that they would like to add or drop someone from your plan. If the employee misses the deadline or is not permitted to make changes for other reasons, he or she must wait until open enrollment to add dependents or apply for coverage.
Waiver of Coverage
Employees may decline health insurance offered by employers. This is called a waiver of coverage. If an employee waives coverage for himself or herself, he or she may not cover dependents under the employer’s plan. Note that in 2014, employees who decline coverage considered affordable and adequate under the Patient Protection and Affordable Care Act will not qualify for government subsidies to purchase individual health insurance.
The decision to waive coverage has consequences for the employee. For example:
- Employees should be aware of the individual responsibility requirement taking effect in 2014 under the Affordable Care Act. An employee who refuses employer coverage and doesn’t obtain coverage on his or her own will be subject to a penalty.
- Unless the employee signs a waiver stating that they are covered under another plan, such as a spouse’s plan, Medicaid, or Medicare, the employee cannot enroll in your plan until the next open enrollment. However, if they are covered under another plan, but that coverage is lost, the employee can enroll in your plan immediately. There’s a time limit for enrolling after the other coverage is lost: the employee must request to enroll in your plan within 30 days of losing the other coverage.
- If the employee waives coverage without being covered under another plan, he or she (and the whole family) may be subject to a pre-existing condition limitation when he or she eventually enrolls in your plan. If the employee gains a new dependent through birth, adoption or marriage, he or she may enroll him/herself, the new dependent, and the entire family at that time, but the employee must do so within 30 days of gaining the new dependent. If the employee misses the 30-day enrollment deadline, he or she must wait until open enrollment.
For information on waiving coverage and the individual responsibility requirement, see “Employee Rules and Rights” in the tool box.
You are required to give employees a notice describing their special waiver of coverage rights. Ask your agent, broker or insurer for a copy of this notice.