FAQ: Small Group Expansion to 1-100 Employees | Department of Financial Services

p. 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 to 100 employees as of january 1, 2016. see q-6 through q-11 below to find out who is an employee.

Reading: How many employees needed for group insurance

p. will new york adopt the aca definition of “small group” effective january 1, 2016?

a.yes. all nonvested groups with 1-100 employees renewing on or after January 1, 2016 must receive small group coverage.

q will new york adopt the department of health and human services “transition policy” that allows groups with 51-100 employees to keep their existing large group coverage for an additional plan year after 1 January 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, negatively impacting small group premiums. therefore, all nonvested groups with 1-100 employees who renew on or after January 1, 2016 must receive small group coverage.

q-4. Do ECA’s guaranteed renewal provisions allow an employer to keep its current coverage if it reclassifies as a different size group?

a. No. pursuant to 45 c.f.r. 147.106(h), guaranteed renewal rights do not allow a group to continue its existing coverage if it would not otherwise be permitted to enroll in such coverage under federal law. accordingly, any group that experiences a reclassification as a large or small group at the time of renewal must receive adequate coverage for that group size.

q-5. Do groups with 51 to 100 employees who are covered by a large group policy in 2015 have to receive small group policies on their renewal date that occurs on or after January 1, 2016?

who is an employee?

q-6. Can groups renew existing policies or receive new policies with a “plan year” longer than 12 months?

a. No. market reforms and qualification requirements (eg, community qualification, unique risk groups, essential health benefits, etc.) in the public health services act (phsa) must be applied on a “year of the year” basis. plan”. cciio has advised that the term “plan year” in the phsa is interpreted to mean a period of no more than 12 months (45 c.f.r. 144.103). Consequently, any policy issued for a period longer than 12 months would not meet the qualification and market reform requirements in the PHSA and is prohibited. any policy that has been issued or renewed for a period longer than 12 months must be reviewed to apply a 12-month period.

q-7. 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 an 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-8. who is a common law employee?

a. In general, 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 consider behavioral control, financial control, and the type of relationship between the parties. An “employee” does not include the sole proprietor of a business or the spouse of the business owner. More information on how to determine who is a “common law” employee is available on the IRS website.

q-9. Are 1099 workers (i.e. independent contractors) considered eligible employees to be covered by 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 cannot prohibit a “1099 employee” from being treated as an employee eligible for coverage. U.S. The Department of Labor Regulations and the Internal Revenue Code apply a common law definition of an employee based on a case-by-case factual analysis. The Department of Financial Services’ views on coverage for independent contractors are as follows:

• opinion: group health insurance, employer-employee group, November 14, 2005
• opinion: group health insurance, employee and employer groups October 6, 2008

q-10. Are leased employees eligible to be covered by an employer’s group contract or policy?

a. whether a leased employee is eligible for coverage must be determined 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 tenant.

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q-11. Will people who were previously covered by an employer group policy be allowed to remain on that policy if they are not considered “employees” of the policyholder?

a. individuals who were previously covered under a group policy but who are not considered common law employees are not eligible to be covered under the group policy when such policy is renewed on or after January 1, 2016, except for participants, retirees and cobra owners. these individuals may be eligible for conversion coverage under the terms of their policy.

q-12. Do employees need to be US 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 American. citizens.

group size determinations/counting methodology

In determining group size, an insurer will need to ask and may rely on information provided by employers, including appropriate tax documentation.

q-13. How should employees be counted when determining group size?

a. The “full-time equivalent” (FTE) method of counting employees at 26 U.S.C. 4980h(c)(2) should be used to determine group size. This method is the same calculation used to determine employer liability under the “employers’ shared liability” provisions of the ECA and the Internal Revenue Code.

q-14. How should part-time employees be counted when determining group size?

a. When determining employer group size, part-time employees must be counted using the FTE counting method at 26 U.S.C. 4980h(c)(2).

q-15. Should part-time employees of an employer be counted toward group size if the employer doesn’t offer coverage?

a. Yes. Part-time employees are counted using the FTE counting method at 26 U.S.C. 4980h(c)(2).

q-16. Is an employer that has more than 100 fte employees but is not considered an “applicable large employer” due to the “seasonal worker exception” at 26 cfr 54.4980h-2 considered a small employer or a large employer?

a. An employer that has more than 100 fte employees but is not considered an “Applicable Large Employer” due to the “Seasonal Worker Exception” will be considered a Small Employer and will be granted Small Group coverage. for more information on the difference between “seasonal employees” and “seasonal workers” and the application of the “seasonal worker exception”, see questions 4, 10, 11, 12, 15 and 54 available on the site irs website.

q-17. What time period 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 previous calendar year.

q-18. How should the group size be determined for an employer group that did not exist in the previous calendar year?

a.pursuant to 42 u.s.c. 18024(b)(4)(b), the group size calculation is based on the “average number of employees the employer is reasonably expected to employ on business days in the current calendar year.”

q-19. Do fluctuations in the number of employees during a group’s plan year change the market the group is in?

a.no. Mid-year fluctuations in the number of employees do not affect the determination of group size. Pursuant to 11 nycrr 360.4(j), class size is only determined at the time of issuance and at the time of renewal.

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q-20. Are retirees included when determining group size?

a. Generally, retirees are not “employees” under 42 U.S.C. 300gg-91(d)(5) and is therefore not counted in the group size. however, exceptions must be considered on a case-by-case basis under 42 U.S.C. 300gg-91(d)(5).

q-21. Are cobra enrollees included when determining group size?

a. In general, Cobra enrollees are not “employees” under 42 U.S.C. 300gg-91(d)(5) and is therefore not counted in the group size. however, exceptions must be considered on a case-by-case basis under 42 U.S.C. 300gg-91(d)(5).

q-22. Are employees who receive coverage through another source (eg, 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-23. When an employer designates different classes of employees for purposes of health insurance coverage as permitted by insurance law, are all classes combined for purposes of counting employees?

a. Yes. for example, union employees are counted along with other employees to determine group size.

q-24. Is the employer group size based on (1) the actual number of employees fte or (2) the number of employees in a class based on conditions related to employment covered by a policy?

a. the size of an employer’s group is based on the actual number of employees fte the employer and not the number of employees offered coverage in a class based on employment-related conditions. accordingly, if a large employer (i.e., an employer with more than 100 fte employees) wishes to offer coverage to a class of employees permitted under conditions related to employment pursuant to 11 nycrr 52.18(f), the class must receive large group coverage regardless of how many employees are in the class. For example, an employer with 200 FTE employees in Manhattan and 20 FTE employees in Syracuse wants to offer coverage to Syracuse employees as a separate class based on geographic location. Syracuse employees must receive large group coverage even though the class size is only 20 employees.

q-25. 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), (c), (m) or (o) are treated as a single employer and all employees are counted together to determine group size.

q-26. When companies merge, combine or consolidate into a single company, how is the size of the group calculated?

a. group size determinations should be made on a case-by-case basis. the facts of each case must be reviewed to make a reasonable determination of class size.

group eligibility

q-27 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. 2510.3-3(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 proprietor of a business or the spouse of the business owner.

q-28. Will groups with between 51 and 100 employees be allowed to purchase loss limit insurance?

a. insurance law §§ 3231(h) and 4317(e) prohibit the sale of loss limitation insurance to any group subject to community qualification. these sections extend to groups with 51-100 employees as of issuance or renewal on or after January 1, 2016.

actuarial value calculator (av) 2016

q-29. How are changes in coverage due to the change in the 2016 average calculator handled?

a. Some insurers plan to discontinue policies that no longer meet AV for the existing metal tier, while others plan to make cost-sharing changes to keep the policy within the existing metal tier. For insurers that choose to discontinue non-AV compliant policies, notices of discontinuation must be issued. Changes to maintain a policy at an existing metal level that are solely due to the mandatory application of the 2016 AV Calculator will be treated as a uniform modification. Renewal notices must explain cost-sharing changes required due to the AV Calculator application and advise that plans with lower cost-sharing options are also available.

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