- May a carrier ask my employees for health information?
Yes. However, health information cannot affect the premium and may not be used as a basis for denying coverage. It may only be used for the purpose of determining whether an injury or illness is a preexisting condition.
- What is a preexisting condition?
A preexisting condition is an injury or illness that a covered person was diagnosed with and/or treated for, or for which treatment was recommended or prescribed medications were taken within the six months before enrolling in the small employer health benefits plan. A pregnancy is never considered a preexisting condition in the group market, even though it can be considered a preexisting condition in the individual market.
- What is a preexisting condition limitation period?
A preexisting condition limitation period is a period of time – up to six months – following a covered person’s enrollment date during which a carrier will not provide benefits for treatment of a covered person’s preexisting condition. There is no impact upon benefits for health care services for treatment of a covered person’s injuries, illnesses or health conditions not related to the preexisting condition during the preexisting condition limitation period. Note that, beginning with the first plan year on or after September 23, 2010, children under 19 years old are not subject to preexisting condition limitation periods.
Example: You hire a new employee, and the employee enrolls in your group plan. The employee has a history of ulcers with on-going treatment. If the employee is subject to a preexisting condition limitation, then the carrier will not provide any benefits for treatment of the employee’s ulcers for up to the first six months of the employee’s coverage. However, if the employee goes to the doctor to treat a case of conjunctivitis and bronchitis during the same six months, the carrier would not exclude benefits for health care services related to treatment of either illness.
- May a carrier impose a preexisting condition limitation period on my group?
If your group consists of two to five eligible employees, the carrier may impose a preexisting condition limitation period. If your group contains six or more eligible employees, the carrier is prohibited from imposing a preexisting condition limitation, except in the case of late enrollees – carriers may impose a preexisting condition limitation period to the late enrollee. For groups with 2 to 5 employees and late enrollees, the preexisting condition limitation period may not exceed six months following the covered person’s enrollment date. Note that, beginning with the first plan year on or after September 23, 2010, children under 19 years old are not subject to preexisting condition limitation periods, regardless of the size of the group or whether the child might be considered a late enrollee.
- I understand the pre-existing condition exclusion applies only to employer groups with fewer than 6 eligible employees, but how does this work if my group size fluctuates between, for example, 3 and 7 eligible employees during the year?
Group size is considered at the time of application and subsequently only once a year (upon anniversary). Changes in group composition in the interim have no impact upon either eligibility or application of preexisting condition limitation requirements. If the preexisting condition limitation applies to your group when you first purchase a group health benefits plan, that requirement will remain in place until your group’s anniversary, even if you hire employees in the meantime. Likewise, if your group has at least six eligible employees when you first purchase the group health benefits plan and later the group size drops to five eligible employees, the preexisting condition limitation period will not suddenly apply to these five employees or to any new employee hired before the anniversary date.
Example A: We’re Growing Places purchases coverage on January 1, 2008. The company has five eligible employees; consequently, all of the employees must satisfy a six-month preexisting condition limitation period. Additional eligible employees are hired during 2008, and both must satisfy the six-month preexisting condition limitation period. Upon its anniversary date, January 1, 2009, We’re Growing Places is officially classified as having more than five eligible employees. Thus, when We’re Growing Places hires one more eligible employee on February 1, 2009, the new hire does not have to satisfy a preexisting condition limitation period.
Example B: When Shrink to Fit purchases coverage on May 1, 2008, the group has six eligible employees; no one is required to satisfy a six-month preexisting condition limitation period. On November 1, two employees leave the company. When a new employee is hired on February 1, 2009, the employee does not have to satisfy a preexisting condition limitation period. On May 1, 2009, Shrink to Fit’s census is determined to be only five eligible employees. So, when Shrink to Fit hires an additional employee on June 1, 2009, the new employee is required to satisfy a preexisting condition limitation period.
- What is the “enrollment date” for coverage?
The "enrollment date" for a covered person is either the effective date of coverage or the first day of an employee’s waiting period if any, whichever is earlier.
- If I require employees to complete a waiting period before enrolling in the group plan, does that have an impact on their preexisting condition limitation period or benefits?
No. Because the preexisting condition limitation period runs from the enrollment date for coverage, and the enrollment date is measured from the first day of the waiting period, the preexisting condition limitation period and the waiting period are counted concurrently. Health conditions that may be diagnosed and/or treated during a waiting period will not be considered preexisting conditions. Of course, costs for health care services rendered during a waiting period will not be covered by the health benefits plan, and will not count towards satisfaction of any cost-sharing requirements.
- What are late enrollees?
Generally, a late enrollee is someone who declined coverage when he or she was first eligible to enroll, and then seeks to enroll at a later date. However, someone who elected not to enroll because he or she had coverage under another group health plan (as an employee or dependent, or through continuation) or because of enrollment in a government program (Medicare, Medicaid, NJFamilyCare) is not considered to be a late enrollee if he or she chooses to enroll in your health benefits plan within 30 days after his or her coverage under the other group health plan or government program ends (involuntarily). In addition, an employee is not considered a late enrollee (and neither are his or her dependents) even though he or she previously declined coverage if he or she elects to enroll in your health benefits plan within 30 days following his or her marriage/civil union/domestic partnership, or the birth, adoption or placement for adoption of his or her child. (Note that, beginning with the first plan year on or after September 23, 2010, children under 19 years old are not subject to preexisting condition limitations anyway.)
Example: Three new employees decline coverage, one because she is covered under a spouse’s group health plan, and two because of costs. Later, all three employees request coverage: one because her husband’s employer changed health plans and no longer permits coverage of dependents; the second because he married and now wants to cover himself and his wife; and, the third because he is making more money and can afford it. The first employee is not a late enrollee, so long as she enrolls within 30 days after her coverage as her husband’s dependent ends. The second employee is not a late enrollee, nor is his dependent, so long as he enrolls himself and his wife within 30 days following their date of marriage. The third employee, however, is a late enrollee.
- What difference does it make whether someone is a late enrollee or not?
In the small group market, late enrollees are subject to a six month pre-existing condition limitation period, even if other enrollees in the group are not subject to such a requirement. Because employer groups with 2 to 5 eligible employees are subject to a six month pre-existing condition limitation anyway, late enrollees are treated no differently than other members of such groups. (Exception: Children under age 19 are NOT subject to a preexisting condition limitation even in groups with 2 to 5 employees, whether or not they are late enrollees.) However, in groups with six or more eligible employees, employees and dependents are not subject to a pre-existing condition limitation period except when classified as late enrollees. (But children under age 19 are NOT subject to a preexisting condition limitation whether or not they may be classified as a late enrollee.) Note, the pre-existing condition exclusion period will be reduced – or possibly eliminated – if the late enrollee had prior creditable coverage that ended no more than 90 days prior to enrollment.
Under no circumstances are late enrollees required to delay enrollment until an “open enrollment period” or until the plan anniversary. Late enrollees may enroll at any time under a small employer plan.
- What if the group or some of its members had coverage before enrolling in the current group plan?
A carrier will give consideration as to whether an employee had coverage before enrolling in the current group plan. Indeed, prior coverage may prevent a carrier from considering someone to be a late enrollee. When an employee may be subject to a preexisting condition limitation, either because of the size of the group, or because the employee is a late enrollee, prior coverage will be credited against the preexisting condition limitation period if the break between the person’s prior coverage and the current coverage is no more than 90 days, and the prior coverage is “creditable coverage.” The carrier will credit the amount of time that the person was covered under the prior creditable coverage against the preexisting condition limitation period, reducing the period, and sometimes eliminating it entirely. A person may be required to produce a certificate of creditable coverage to prove that s/he had prior creditable coverge. Alternate documentation of prior coverage may be substituted, if necessary.
Example: An employee joins a group with fewer than six employees. The employee is not covered under another group health plan or government program on the date he is hired, but previously was covered for 5 months under another group health plan. The employee’s previous coverage terminated within 90 days prior to his enrollment date for coverage under the current small employer’s health benefits plan. The carrier will credit the employee’s time covered under the prior creditable coverage against the preexisting condition limitation period applicable to small employer groups of fewer than six employees. Because the preexisting condition limitation period is 6 months, and the employee had only 5 months of prior creditable coverage, the employee will still have to satisfy a one month preexisting condition limitation period.
- What is creditable coverage?
The term “creditable coverage” is defined in federal law as part of the Health Insurance Portability and Accountability Act. Most health coverage that is insured (whether purchased on an individual or group basis), self-funded by an employer or employee organization (such as a union), or funded through government programs, including coverage through foreign government programs, is considered creditable coverage if it includes coverage for medical and hospital expenses. Policies that are for limited benefits (for instance, covering dental only), or that provide cash assistance while someone is hospitalized or disabled (such as, hospital confinement indemnity coverage) are not considered creditable coverage. In addition, policies in which health care services are covered in an incidental manner do not qualify as creditable coverage, so for instance, having personal injury protection coverage through an automobile insurance policy is not included as creditable coverage. Also, workers’ compensation coverage is not considered creditable coverage.
- How is creditable coverage verified?
Carriers and/or plan sponsors are required to provide employees and covered dependents with certificates of creditable coverage following termination of coverage. Carriers and plan sponsors are also required to be cooperative with subsequent employers and carriers in providing information about prior creditable coverage. The certificate of creditable coverage should include information about when the covered person became covered and when coverage was terminated.
- If I offer coverage to my employees, do I have to permit coverage of dependents?
No. But if you permit one employee within a class to cover dependents, then you must permit all employees within that class to cover dependents. Distinctions in classes of employees must be based on conditions pertaining to employment, such as job title, length of service, or salary.
- If I permit my employees to cover dependents, do I have to contribute to the premium for dependents?
No. While you are required to contribute 10% of the total premium for your covered employees, you do not necessarily have to contribute to the premium related to dependent coverage at all. Of course, if you elect to contribute to the dependent premium, you may choose to contribute any amount you wish, by class of employee.
- Are dependents subject to preexisting condition limitation provisions?
Yes, if the dependent is 19 years old or older and the group is subject to preexisting condition limitation periods generally, or if the dependent is 19 years old or older and is considered a late enrollee. Children under 19 years old are never subject to a preexisting condition limitation period. Eligible dependents enrolling in an employer’s health benefits plan within 30 days following an employee’s marriage/civil union/domestic partnership (if applicable), a birth, an adoption or placement for adoption, should never be considered late enrollees. (So, for instance, upon the birth of a child, an employee may enroll that child, as well as any other children the employee may have that he or she has not previously enrolled.) In addition, dependents enrolled pursuant to a court order are not considered late enrollees, and consequently, may not be subject to a preexisting condition limitation period. When a dependent is subject to a preexisting condition limitation period, a carrier will reduce the dependent’s preexisting condition limitation period by the number of days of creditable coverage the dependent had prior to his or her enrollment date, but not days of creditable coverage that occur before a lapse in coverage of more than 90 days.
- Who is considered an eligible dependent?
An eligible dependent includes a spouse, a civil union partner, and an employee’s child through birth, marriage, civil union, adoption or placement for adoption. A domestic partner and his or her children may be considered dependents for purposes of coverage under a health benefits plan, at the option of the employer. When children are covered, they are covered up to a specified limiting age, which beginning in September 2010, is at least to age 26 years old. “Over-age” children – those who have attained the limiting age, but who are not yet 31 years old – are also eligible to be covered through a continuation law referred to as “Dependent Under 31.”
- Can't carriers or employers impose limits on which child dependents under age 26 qualify based upon financial dependency, marital status, enrollment in qualified institutions of higher education, residency or other factors?
No. Federal law requires that, beginning with plan years on or after September 23, 2010, when a plan covers dependents, it must do so until a child reaches the age of 26, regardless of whether the child is in school, married or unmarried, still living at home or even financially dependent upon the parent. However, there is an exception: group health plans in existence on March 23, 2010 may exclude adult children who are eligible to enroll in an employer-sponsored health plan other than the group health plan of the parent. This exception will no longer be applicable for plan years beginning on or after January 1, 2014.
- If I allow my employees to cover dependents, are my employees allowed to cover dependent children who are working and have access to coverage through another group health plan?
Yes the terms of the SEH health benefits plans permit employees to cover older children through the parent’s employer’s plan even though the child may have access to another group health plan through, for instance, the child’s job. The only exception to this requirement is for a plan that qualifies as a grandfathered plan under the federal Patient Protection and Affordable Care Act.
- What is “Dependent Under 31”?
The “Dependent Under 31” law became effective in May of 2006. The law permits children who age out of a group health benefits plan the option of continuing or enrolling in a parent’s group health benefits plan until the child reaches his or her 31st birthday, marries, has a child, moves out-of-state (and does not become a full-time student), enrolls in other group or individual health coverage, or becomes entitled to Medicare. The over-age child may enroll upon age-out, but may also enroll whenever he or she becomes eligible. The Department of Banking and Insurance has more information about Dependent Under 31 on its web site at www.state.nj.us/dobi.
- What obligations do employers have with respect to Dependent Under 31?
Like other continuation options, employers have an obligation to provide employees and their dependents with information regarding the Dependent Under 31 election option. Employers cannot prevent an eligible over-age child from making a Dependent Under 31 election. There is no obligation for the employer to contribute to the over-age child’s premium. However, the employer may have an obligation to collect the premium and remit it to the carrier (if that is the arrangement between the carrier and the employer). In those instances, the employer may retain a 2% administrative fee, based on the monthly rate. (In other words, the over-age dependent may be responsible for up to 102% of the dependent child rate.) For more detailed information, find Dependent Under 31 information on the Department of Banking and Insurance’s website.
- Do I have to offer a continuation option?
Yes, you must offer a continuation option to employees and their qualified beneficiaries upon the occurrence of qualifying events. If you have 20 or more employees, you are required to offer a continuation election option in accordance with the federal law referred to as COBRA as well as the New Jersey State Group Continuation (NJSGC) law. If you have fewer than 20 employees, you are required to offer a continuation election option in accordance with the NJSGC law only, simply because COBRA does not apply to employers with fewer than 20 employees.
But remember, in determining whether federal standards apply, all employees on the payroll are counted, not just “eligible employees” as defined by New Jersey law. In determining whether COBRA applies, part-time employees are included in the count as fractions of full-time employees.
- To whom do I have to offer a continuation election?
In general, you must offer a continuation election option to an employee whenever he or she has been covered under the group plan, but is no longer eligible for such coverage. If the employee was covering dependents, the employee has the right to continue coverage for such dependents as well. However, a dependent who has been covered through the group plan has a separate right to continue coverage pursuant to COBRA or NJSGC in the event of death of the employee, divorce, or because he or she is no longer an eligible dependent. NJSGC (but not COBRA) applies when a dependent loses coverage due to dissolution of a civil union. In addition, you must offer a continuation election option in accordance with the Dependent Under 31 law to child dependents that have aged-out.
- Do I have to contribute to an employee’s premium in the event he or she elects continuation if I was contributing to premium when he was covered as a regular group member?
Not generally. However, an employer subject to the requirements of the Family Medical Leave Act has to contribute to the premium related to an individual with continuing coverage when the employee is not working because of use of leave under the Family Medical Leave Act.
- What is the duration of the election period for an employee or dependent to make a continuation election?
COBRA permits an employee or dependent, as appropriate, to make an election within 60 days following notice of the opportunity to continue coverage. NJSGC permits an employee or dependent to make an election within 30 days following the occurrence of a qualifying event (loss of coverage). With respect to Dependent Under 31 as it applies to small employer coverage, the child may make an election during the 30 days prior to aging-out and at anytime thereafter while eligible.