- How does a carrier determine the premium for my group?
Carriers determine a group’s rates based on the plan of benefits selected and the characteristics of the group. The SEH Program permits carriers only to consider the age, gender, and family status of employees in the group, and the location of the business in New Jersey in determining the premium. Carriers may not consider the health status, nature of business, or past claims experience of a group in determining premium.
- Are rates guaranteed for a specific period of time?
The SEH Program Act does not require that carriers guarantee their rates for any period of time. However, most carriers do. Ask the carrier or your broker or agent if rates are guaranteed and for how long.
- How long should I expect to wait for a price quote?
In practice today, price quotes are run immediately, so you should not have to wait. (Technically, a carrier has up to 10 business days to provide you with a price quote after you have given the carrier all the information the carrier needs to develop the quote.)
- If one or more of my employees incurs significant claims, can a carrier cancel the coverage or refuse to renew it?
No, a carrier may not terminate a small group’s coverage based upon the claims experience of the group or specific members of the group. Small employer coverage is guaranteed renewable at the option of the employer, except when: the employer fails to pay the premium, the employer fails to provide the completed Annual Certification; the employer has acted fraudulently with respect to the coverage; the carrier has elected to withdraw from the small employer market entirely; the employer no longer meets the definition of a small employer; or, the group no longer meets participation or contribution requirements.
- If one of my employees incurs significant claims, can a carrier refuse to continue covering that employee?
No. Carriers cannot refuse to renew coverage for any member of a small employer group because of claims experience or health status-related factors.
- If one or more of my employees incurs significant claims, should I expect to see a significant increase in rates because of it?
Not necessarily. Because of how rates are developed, your group’s specific premium is not directly related to your group’s specific claims. The SEH Program Act requires carriers to community rate health benefits plans, which means that the carriers blend the experience of all groups that purchase a health benefits plan to develop a community rate. The rate is then modified by group to take into consideration specific group characteristics as permitted by the SEH Program Act. Although the experience of your group will have an impact on the rate for the health benefits plan for your carrier, it will be blended with the rates of all other groups purchasing the same health benefits plan, and will not be tied directly to your premium.
- What can I do if I am unhappy with the rates being charged by my current carrier?
You have several options. You are not required to stay with a specific health benefits plan indefinitely. You may have an option to change some of the cost-sharing requirements of your current health benefits plan, or add or remove coverage riders. You also may be able to switch to a lower cost plan offered by your current carrier. In addition, you may be able to switch to another carrier offering the same health benefits plan at lower rates.
But note: Changes in health benefits plans are not entirely unrestricted. Carriers are not required to honor any requests for plan changes unless the existing plan has been in effect for at least 12 months.
One of the goals of the reforms was to provide for "portability." Portability enables you to shop around for coverage from another carrier without having to worry about new pre-existing condition exclusions. For more information about restrictions on use of preexisting condition limitations, you may want to review questions and answers about Health, Dependents and Continuation Issues. And remember, even if your employees or their dependents are considered poor health risks, all carriers must accept your group for coverage, and the premiums charged may not be based on health status or prior claims history.
- What are the standard health benefits plans for small employers?
Small employers have a variety of standard plans to choose from. Plan A is primarily designed to cover health care facility inpatient costs, although it covers a few office visits and outpatient services, too. Plans B, C, D, E and HMO cover a wide array of inpatient and outpatient medical and hospital services, as well as prescription drugs. The primary difference between Plans B through E is the cost-sharing requirements applicable to each of the plans. The HMO Plan is an HMO product, so it differs from Plans B, C, D and E not only with respect to the cost-sharing arrangement, but also in the degree to which the health care services are “managed” and requirements to use a specified network of providers except in emergency and other extraordinary circumstances.
- What are the cost-sharing requirements for the standard health benefits plans?
See the Snapshot of the Standard Small Employer Health Benefits Plans, contained in the New Jersey Small Employer Health Benefits Program Buyers’ Guide. In addition, a broker can provide more information for the carriers he or she represents.
- How do deductibles work, and what are the deductibles for the standard small employer health benefits plans?
Deductibles are the amount of allowed charges for which the covered person is responsible before the carrier agrees to pay anything towards covered charges. So, for instance, if a person has a policy with a $2500 deductible, until the covered person pays $2500 in allowed charges for covered services, the covered person is not entitled to have any of the charges reimbursed by the carrier.
In the standard small employer plans, Plan A has a $250 deductible, and Plan E has a $150 deductible per covered person. A carrier may offer a range of deductibles for Plans B, C and D from $250 to $5,000. A carrier may offer the HMO Plan with a deductible within a range of $250 to $2,500 per covered person. Carriers also have the option of offering all of the standard plans with a family deductible that is 2x the covered person deductible, or 3x the covered person deductible. If the family deductible is 2x the covered person deductible, then two separate people in the family must satisfy the full amount of the covered person deductible before allowed charges for all family members are considered for reimbursement. If the family deductible is 3x the covered person deductible, the deductible does not have to be satisfied separately by any member, but rather, incurred allowed charges for covered services of the family members are aggregated to reach the deductible limit. For more information, see the Snapshot of the Standard Small Employer Health Benefits Plans.
Example A (Individual deductible): Mike is covered under Plan C with a $500 covered person deductible and a 30% coinsurance paid by the covered person. Mike incurs a $100 allowable charge every month beginning in January. Until June, Mike is responsible in full for the $100 allowable charge every month. Beginning in June, because the deductible ($500) has been met, the carrier pays 70% of the allowable charge.
Example B (Family deductible satisfied by two separate individuals): Mike and his family (spouse and children) are covered under Plan C with a $500 covered person deductible, and a 2x family deductible, to be satisfied by two separate people. Also, there is a 30% coinsurance requirement. Mike incurs $500 in covered charges. His wife incurs $300 in covered charges. The carrier is responsible to pay 70% of incurred allowable charges for Mike now that his deductible is satisfied. However, either his wife must incur $200 more in allowable charges or one of the children must incur $500 in allowable charges before the carrier pays 70% of allowable charges for Mike’s wife and/or children.
Example C (Family deductible satisfied in aggregate): Mike and his family are covered under Plan C with a $500 covered person deductible, and a 3x family deductible ($1,500), to be satisfied by the family as a whole. Also, there is a 30% coinsurance requirement. Mike incurs $1,000 in allowable charges. Having satisfied the covered person deductible, the carrier is responsible to pay 70% of allowable charges for Mike. Mike’s wife incurs $400 in allowable charges. Once any family members incurs another $100 in allowable charges, the carrier is responsible to pay 70% of allowable charges for all family members.
- How does coinsurance work, and what are the coinsurance requirements for the standard health benefits plans?
“Coinsurance” is a term used to express the promise by the carrier to share, on a percentage basis, payment for allowed charges for covered health care services with the covered person. The standard small employer Plans A through E have specified coinsurance requirements, but the actual coinsurance amount may vary depending on whether the plan is offered with or without a network feature. That is, when the plan is offered without a network (a plain indemnity plan), the coinsurance is specified as follows: for Plan A, the carrier pays 80% of allowed hospital charges for covered services, and 50% of allowed charges for all other covered services; for Plan B, the carrier pays 60% of allowed charges for covered services; for Plan C, the carrier pays 70% of allowed charges for covered services; for Plan D, the carrier pays 80% of allowed charges for covered services; and, for Plan E, the carrier pays 90% of allowed charges for covered services. When the standard plans are offered with a network feature (that is, as PPO products), then the coinsurance percentages in-network and out-of-network may differ for in-network and out-of-network benefits , each ranging from 50% to 100%. For the HMO Plan, when coinsurance applies (and it only applies when copayments do not apply to a covered service), the carrier may offer the plan with a coinsurance specified within a range of 50% to 100%.
Example: Martha is covered under Plan D, which requires the carrier to pay 80% of allowed covered charges. Martha has already satisfied her deductible when she incurs another $700 expense. The carrier considers the health care services to be covered and the full amount of the charges are allowed. The carrier pays $560 of the $700 charge ($700 x .80 = $560), and Martha is responsible for the remaining $140.
- What is the Maximum Out-Of-Pocket (MOOP) amount and how does it work?
The MOOP is the maximum amount of allowed charges for covered services that a covered person/family is obligated to pay before the carrier agrees to pay for all of the allowed charges for covered health care services. For the standard health benefits plans, allowed charges the covered person pays towards the deductible, coinsurance and copayments help to satisfy the MOOP. The family MOOP is 2 or 3 times the covered person MOOP for traditional indemnity plans, or 2 times the covered person MOOP for network-based plans. Family MOOPs established as 2x the covered person MOOP may require two separate family members to satisfy the MOOP, or may permit all charges incurred by the family to satisfy the MOOP. Family MOOPs that are 3x the covered person MOOP must allow for aggregation of the family expenses.
Example A (satisfaction of the MOOP by two separate individuals): Rose has family coverage under a Plan C, with a deductible of $500 (2x for the family), 30% coinsurance (meaning the carrier pays 70% of allowed charges), and a MOOP of $3000 (2x for the family). Rose incurs $3,500 in allowable charges, her husband incurs $2,000 of allowable charges, and her daughter incurs $1,000 of allowable charges. Both the covered person and family deductible have been satisfied. Rose has met the MOOP for a covered person, so the carrier is responsible for paying all of the allowable charges Rose now incurs. The carrier will be responsible for 70% of allowable charges for Rose’s husband and daughter until either her husband incurs another $1,000 of allowable charges, or her daughter incurs another $2000 of allowable charges.
Example B (satisfaction of the MOOP in the aggregate): Rose has family coverage under a Plan C, with a deductible of $500 (3x for the family), 30% coinsurance (meaning the carrier pays 70% of allowed charges), and a MOOP of $3000 (3x for the family). Rose incurs $3,500 in allowable charges, her husband incurs $2,000 of allowable charges, and her daughter incurs $1,000 of allowable charges. Both the covered person and family deductible have been satisfied. Rose has met the MOOP for a covered person, so the carrier is responsible for paying all of Rose’s allowable charges. The carrier will be responsible for 70% of allowable charges incurred by Rose’s husband and daughter until the family has incurred an additional $2,500 in satisfaction of the family MOOP.
- Are there any charges that do not count towards satisfaction of the MOOP amount?
Yes, some charges may not count towards satisfaction of the MOOP.
Cost sharing for prescription drugs often does not count towards satisfaction of the MOOP amount, although there are exceptions. One exception is high deductible health plans (HDHP) – which are meant to be combined with a health savings account, or HSA. In addition, carriers can offer plan designs in which prescription drug charges apply towards the MOOP.
Charges for health care services that are not covered under the health benefits plan do not count towards the MOOP amount. In addition, charges for covered health care services that exceed the allowed amount – as determined by the carrier – are not counted toward the MOOP amount.
- What does “allowed charges” refer to?
“Allowed charges” refers to either the charges billed by the health care provider or the amount of billed charges that a carrier considers eligible and covered under the health benefits plan, whichever amount is less. “Allowed charges” may also refer to the negotiated rate of payment. The amount of charges that a health care provider bills for his or her services, and the carrier’s allowed charges may not be the same – sometimes the provider bills more than allowed charge, and sometimes the provider bills less. When determining amounts due to the provider subject to a coinsurance percentage, the carrier bases what it pays on either the allowed charges or the provider’s billed charges, whichever amount is less. When there is a negotiated rate of payment, the provider’s bill may reflect the negotiated rate, or it may be in excess of the negotiated rate, but the carrier will only pay the negotiated rate.
Example: A physician bills a covered health care service at $1,000. The carrier determines the allowed charges to be $800. If the carrier is paying 80% of the allowed charges, then the carrier will pay $640 ($800 x .80 = $640). The covered person would pay 20% of the allowed charge, or $160. If the health care provider is an out-of-network physician, the covered person is also responsible for the remaining $200 “excess” charge between what the provider billed and the allowed charges.
- Aren’t the standard plans usually offered with in- and out-of-network benefits?
Plans A through E can be offered with and without a network component. Carriers most often offer and sell Plans B through E with a network component.
When offered without a network, these plans are traditional indemnity plans. When offered with a network, these plans are referred to as Preferred Provider Option (PPO) or Point-of-Service (POS) products. When Plans A, B, C, D or E are offered with a network, the plan will have both in-network and out-of-network benefits. The HMO Plan is always offered with a network component, but it may be offered as a closed network product (a traditional HMO product), or it may be offered with out-of-network coverage options, referred to as an HMO-POS product.
- What’s an in-network benefit versus an out-of-network benefit?
The in-network benefits are the benefits (reimbursement or monetary value) a covered person is entitled to when he or she receives covered services through an in-network health care provider. The out-of-network benefits are the benefits a covered person is entitled to when he or she receives covered services through an out-of-network health care provider. Because health care providers in a carrier’s network have agreed with the carrier to a negotiated rate of payment, and have agreed not to collect charges in excess of the negotiated rate of payment from the carrier’s covered persons, in-network benefits are almost always greater than out-of-network benefits for the covered person. When a covered person chooses to receive covered services outside of the carrier’s network, the covered person is responsible for any charges that the health care provider may bill that exceed what the carrier considers to be reasonable and customary, and these excess charges do not count toward satisfying any deductible or maximum out-of-pocket (MOOP) requirements in the standard health benefits plan.
- If a plan has both in-network and out-of-network benefits, are there separate deductibles, coinsurance, copayment and MOOP requirements for the in-network and out-of-network benefits?
The carrier has an option of whether to use two different deductibles and MOOP limits, or a common deductible and MOOP limit for in-network and out-of-network benefits. When the carrier uses two different deductibles and MOOP limits, the out-of-network deductible and MOOP limits cannot be more than 3 times greater than the in-network deductible and MOOP limits. When separate deductible and MOOP limits apply, the in-network and out-of-network cost-sharing requirements must be satisfied separately, and there is no cross-accumulation of expenses. That is, costs incurred out-of-network will only satisfy the out-of-network cost-sharing requirements, and costs incurred in-network will only satisfy the in-network cost-sharing requirements.
Example: Handyman, Inc. purchased a Plan D PPO product. The in-network component has a $250 deductible, 80% coinsurance and $2250 MOOP. The out-of-network component is like a Plan B, with a $500 deductible, 60% coinsurance and $3,500 MOOP. Handyman’s employee, Dave, uses mostly in-network health care providers, but uses an out-of-network chiropractor. The charges billed by an in-network provider for services can be applied to satisfy the in-network cost-sharing requirements, but the charges billed by the out-of-network chiropractor cannot be applied in that same manner. Instead, the chiropractor’s charges will be applied to satisfy the $500 out-of-network deductible and will be paid at 60% of allowed charges thereafter by the carrier.
- If an employer replaces a standard health benefits plan with another standard health benefits plan, do the covered persons have to start satisfying the deductibles all over again?
Not necessarily. When a standard health benefits plan is replaced by another standard health benefits plan, whether with the same carrier or another carrier, the carrier will count accumulated charges incurred by a covered person under the old plan towards satisfaction of the new policy’s deductible if: the covered person accumulated charges during the same calendar year in which the new policy takes effect; the new policy takes effect immediately upon termination of the old policy; and, the covered person was enrolled under the old policy upon the termination date.
- Do the standard health benefits plans provide coverage for prescription drugs?
Plans B, C, D, and E – whether issued on a PPO, POS or indemnity basis – and the HMO Plan (including the POS versions) provide coverage for prescription drugs provided both while an inpatient and an outpatient. Plan A only covers prescription drugs provided while hospitalized.
- What is a rider?
“Rider” is the term used to refer to a document that changes the benefits or some other term of the underlying plan. In the SEH market, a rider may be used to increase or decrease the benefits of the underlying plan (some riders feature a combination of increases and decreases). The increase or decrease in benefits will have an effect on the price of the plan.
Many carriers offer multiple riders. Many offer a rider that modifies the prescription drug benefit so that coverage may be obtained using mail order or through prescription card services. Carriers sometimes offer vision benefits, or enhance other benefits in the policies. Some carriers also offer riders that reduce some benefits, such as therapy services, coverage for home health and coverage for durable medical equipment. Be sure you fully understand what you are buying. Insist that you be given detailed information that allows you to identify what additions or limitations the rider makes to the underlying standard plan.
- Do I have to buy a standard plan with a rider?
NO! Carriers may sometimes market standard plans with one or more riders almost as if the standard plan and the rider is a package deal. However, an employer always has the right to obtain a price quote and purchase a standard plan without any riders. To determine if the plan plus rider is really what you want, be sure to understand everything the rider does. If the plan plus rider is cheaper than the cost of the plan without the rider, it means the rider somehow limits the plan’s coverage. You’ll need to decide if you are willing to offer a plan with those limits to your group.
- Is there a grace period for paying premiums?
Yes. If premiums are paid within 31 days following the premium due date, the policy will remain in effect. If an employer does not pay premiums by the end of the grace period, the coverage will lapse. To avoid potential problems and misunderstandings, it is always advisable to submit premiums by the due date.
Premiums continue to be owed while coverage is in effect. If a policy lapses at the end of a grace period, the employer remains liable for the premium for the period coverage was in effect.
- After I have purchased a small employer health benefits plan, may a carrier continue to require me to complete forms?
Yes. The carrier will require you to fill out an Annual Certification form in order to determine the number of employees and your participation rate. Failure to provide this information will result in non-renewal of coverage.
- What is "self-insurance" and "stop loss" or "excess risk" insurance?
Some employers, especially large employers, opt to provide health coverage to their employees through a self-funded arrangement. Under such an arrangement, the employer is liable for expenses for the health coverage offered to the employees. Most employers that self-fund elect to purchase "stop-loss" or "excess risk" insurance for some portion of their potential liability from claims under the contract for health coverage. Stop loss and excess risk insurance is designed to reimburse the self-funded arrangement for catastrophic, excess or unexpected claims expenses. Carriers may not legally offer stop loss or excess risk policies to small employers with "attachment points" of less than $20,000 per person per plan year and 125% of expected claims per plan year. The attachment point is the line of demarcation between the employer’s liability and the carrier’s liability. That is, a stop loss policy with an attachment point of $20,000 per person and 125% of expected claims per plan year means that the employer is responsible for at least $20,000 per person and 125% of expected claims for the group per plan year before the carrier pays any of the health care expenses incurred by group members. Please note that employees covered under an employer’s self-funded plan do not count when determining whether an employer has met participation requirements for SEH plans.
- What is the impact on a small employer group when a full-time employee turns age 65 and becomes eligible for Medicare?
Eligibility for Medicare does not preclude eligibility for coverage under the employer plan. Thus, the employee may be covered under both Medicare and the group plan. On the other hand, if the employee prefers to be covered only under Medicare, that decision will not have a negative impact on the group participation requirements. Carriers are required to count eligible employees covered under Medicare towards the participation requirement.
If the employee elects to be covered under both Medicare and the group plan, there will be coordination of benefits between the plans. There are federal rules to determine which plan pays first and which plan pays second. The purpose of coordination of benefits is to allow a person to claim benefits from both Medicare and the employer plan, with the primary carrier paying benefits as if there were no other coverage, and the secondary carrier paying up to the difference between what the primary carrier paid and the amount of the allowable charge.
When the employer has fewer than 20 employees, Medicare is the primary carrier, and must pay first.* The employer’s group plan is secondary, and pays after Medicare does. In fact, if the employee does not elect to enroll in Medicare (Part B) right away, the carrier will still pay as secondary (as though the employee had Medicare coverage), reducing the benefits available to the employee under the SEH plan accordingly.
When an employer has 20 or more employees,* the Medicare-eligible employee may choose whether Medicare or the group policy will be primary (the default in the event the Medicare-eligible fails to make an affirmative election is for the group health plan to be primary and Medicare secondary).
Lastly, there will be an impact on the group rate. Carriers consider Medicare eligibility of one or more of the group’s members when establishing rates, thereby acknowledging the carrier’s generally reduced liability when paying as a secondary carrier.
*When determining application of federal standards to employer groups, each employee on the payroll is considered, NOT just eligible employees as defined by the New Jersey Small Employer Health Benefits Program Act. (Federal law may look at independent contractors – so-called 1099s – differently than state insurance laws. Employers should consult with an accountant regarding the status of those performing work for the business.) The federal Medicare secondary payer rules state that upon the day an employer has 20 or more employees for 20 or more work weeks (consecutive or not) in the preceding calendar year, the group health plan MUST be the primary payer of claims for a Medicare eligible individual covered under the group health plan.
- How do I go about terminating a policy?
If you wish to terminate a policy, whether you are canceling it sometime during the plan year, or electing not to renew the policy upon its anniversary, you should give affirmative notice of your intentions to the carrier or the carrier’s agent. Remember, small employer health benefits plans are issued for a term of one year (12 consecutive months), and are guaranteed renewable by the employer. Upon submission of the annual employer certification, the carrier will renew the policy for another term unless you advise that you do not want to renew it.
You may cancel a policy before the end of the 12-month period. Although a carrier cannot require that an employer provide advance notice of an intention to terminate a policy, a carrier is only required to honor prospective termination requests, not retroactive termination requests. If you make a prospective request to terminate the policy, the carrier will terminate the policy as of the date you specify. You are liable for payment of premiums for the period of time during which the contract remains in force, but the carrier will refund any premiums you have already paid for time periods exceeding the date of termination.
With respect to requests for retroactive termination, the carrier will terminate your policy on the date the carrier receives the notice, and refund premium for any remaining days. So, if you pay a month of premium on April 1st, and then on April 25th send notice to the carrier to terminate the policy as of April 15th, the carrier is only obligated to terminate the policy as of April 25th, not April 15th. The carrier would be required to refund 5 days worth of premium, not 15 days of premium.