WHAT IF EMPLOYEES DECLINE GROUP HEALTH INSURANCE

There are a few reasons an employee may choose to decline coverage offered through their employer-sponsored group health plan.

It is more common these days for employers to require the employee to contribute a percentage or the difference above a fixed dollar amount to the employee's health insurance coverage and/or dependent health insurance.

An employer may also have their own coverage even on an individual/family basis or through a spouse's group health plan.

Whether an employee (or dependent) has individual/family or group health coverage can significantly affect them if they decline health benefits.

Let's take a quick look at the implications of such a decision.

An Employee declines group health insurance

An employee has the choice to decline coverage at the time of initial eligibility.

The period of initial eligibility is usually when an employee has met his/her waiting period after initial hiring or obtaining full time status (if part time employees are not covered).

All newly eligible employees need to either enroll in coverage or declined coverage.

If the employee declines coverage, and is not on another group (employer-sponsored) health plan, he/she may need to wait till anniversary date to come back onto the group plan.

This is also true for dependents.

The key is whether they have other group health insurance.

If they lose their other group health insurance, they can come back on board any time (1st of the month following the application submittal and qualifying event).

 It is very important that employees who choose to decline coverage understand that this factor and how it affects their ability to come on board.

The application has a section where they need to sign to this fact but it make sense to key them into how this works.

An employee can choose to accept coverage for himself/herself and decline coverage for certain dependents but the same rules apply as mentioned above.

An employee cannot declined coverage for himself/herself and accept group health insurance for dependents however.

Focal renewals and employees opting for coverage

There may be times during the year where some carriers allow employee changes such as off-anniversary enrollment.

This usually occurs during focal renewals which basically means Statewide rate and benefit changes.

This tends to happen once a year but an employee cannot count on be able to come back on board at that time.

This is also a function of the carrier and what they allow. Some carriers apply the rate increases at the group's specific anniversary date in which case, there is no difference.

Employees declining coverage and participation requirements

Another issue with employees declining coverage is how it affects the group's ability to qualify based on participation requirements.

As part of AB 1672 and guaranteed issue qualifications, 75% of eligible employees must go with the health (or dental) plan.

If a sizable number of eligible employees decline coverage, it can cause the group not to qualify for coverage. This is usually an issue when the employer requires a sizable contribution from the employee which they feel they cannot afford.

Even if a group originally qualifies and meets this requirement, declinations or changes in total number of eligible employees can cause the group not to qualify at the time of renewal or if the group decides to re-qualify.

The employer may want to re-evaluate how much the company will contribute towards the coverage in order to entice more employees to enroll (or better yet, not to decline).


 

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