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SMALL GROUP ADMINISTRATION
ELIGIBILITY:
The Health Insurance Portability & Accountability Act of 1997 (HIPAA) changed the landscape for small group legislation. Small groups are defined as businesses which employ between 2 and 50 employees.
In order for a small group medical plan to be implemented, there must be at least 2 employees who are covered under the medical plan. Husband and wife two life group plans must have supporting documentation to show both are full-time employees.
Only full-time employees are eligible for medical insurance. The HIPAA law defines a full-time employee as one who works 30 hours/week, even though the U.S. Department of Labor defines full-time as an employee who works 40 hours weekly.
Each employee’s family members are also eligible for medical coverage. Employee’s spouses, children, step children, and adopted children are eligible dependents. Typically children are eligible up to age 19 unless attending school on a full-time basis. Each insurance company has a different maximum age for children attending school.
HIPAA is a federal law designed as a guideline for minimum requirements. Insurance companies can be more liberal in their rules and each company does have different rules. Our agency is very familiar with each carrier we represent so we can recommend the best carrier for your business.
GUARANTEES:
The HIPAA law states that an insurance company cannot decline a small group medical plan based on medical conditions. Insurance companies can deny acceptance if the group does not meet participation rules or has more than 50 employees. However, HIPAA does not regulate a
maximum pricing for eligible groups. Each state has been delegated the responsibility
for rate legislation. In Illinois, the maximum rate load is 67% above the lowest price quoted
for new business cases. A complete description of the Illinois rate practice law can be found in the information links section of our website.
HIPAA also states that group plans cannot have exclusion riders on any insured member's individual
medical conditions. Individual medical plans are not regulated in the same manner and do allow for exclusion riders.
Each group sets their probationary period for new employees. This timeframe can range from immediately to 6 months. Typically the effective date is the 1st of the month after the stated waiting period. HIPAA states that an employee and his or her family will have guaranteed acceptance as long as enrollment is completed during the probationary period. If an individual does not enroll during the probationary period, they will be considered a late entrant and will not be eligible until the next annual open enrollment period.
Pre-existing conditions can be limited on group plans. All insured members are subject to a pre-existing clause. HIPAA defines a pre-existing condition where an individual has received medical treatment for a specific condition within the 6 months preceding his or her effective date of coverage. The waiting period for claims to be paid on a pre-existing condition is 12 months for timely entrants and 18 months for late entrants.
HIPAA rewards individuals who have taken the responsibility to maintain their medical insurance. The pre-existing condition waiting period is reduced by the number of months an individual was covered by previous insurance. If an individual was continuously insured for at least 18 months, there would be no waiting period on his or her pre-existing conditions. If an individual was covered for only 8 months, then his or her waiting period would be 4 months for a timely entrant and 10 months for a late entrant.
HIPAA defines continuous medical coverage as being insured with a break in coverage not longer than 63 days. For example, if an insured was insured for 2 years and was not covered for 1 month, he or she would be considered continuously insured for 2 years. If an individual goes longer than 63 days without medical coverage, this is considered to be a break in coverage and no longer continuous. Once there is no continuity, there is a full waiting period on any pre-existing conditions.
Renewal pricing is governed by each state. Illinois has a comprehensive small group rate practice law. To explain the details is very extensive, but for groups with high claims there is substantial protection from extreme renewal increases. Please refer to this law in the information links section of our website.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) allows for a terminated employee and his or her family to continue the medical plan at their own expense. The COBRA law only pertains to groups with 20 or more total employees. Illinois has their own continuation law for groups with less than 20 employees. Again, please refer to the information links under the laws section.
IMPLEMENTATION REQUIREMENTS:
HIPAA changed
the landscape of group medical insurance.
Because insurance companies cannot decline a
group for medical reasons, administration requirements can be the determining factor for acceptance. Here is the list of administrative documents needed for the issuance of a group medical plan for a small business.
Illinois Department of Employment Security (IDES) wage & tax report:
The most recent quarterly wage & tax report is required to show the listing of all employees who work for the small business. The insurance company will ask questions regarding the full or part time status of employees listed on the report. Usually, 75% of eligible full-time employees must be insured for a plan to be issued. Payroll records must be provided for any employees not shown on the report. In addition, this report determines if the small business is subject to the COBRA laws. This is a due diligence process by the insurance company before the plan is issued.
Corporation or ownership papers for husband & wife groups:
When a husband and wife group is proposed, the insurance company will ask for proof of joint ownership or the articles of incorporation. If the husband and wife group is a corporation, and both are shown on the wage & tax report, proof of ownership would not be needed.
The most recent premium statement from the prior insurance company:
This is needed as a cross check with the wage & tax report and the individual applications submitted. The premium statement will show if there is an outstanding balance with the prior carrier which could lead to an approval delay.
Worker’s Compensation carrier & policy number:
The new medical insurance carrier will want to exercise due diligence and make sure that there is occupational protection for the employees being insured. Work related illnesses or injuries are excluded on all group medical plans. Illinois state law requires all businesses to have workers compensation insurance. The owner of a business can waive workers compensation for himself and can be covered under the medical plan for work related illnesses or injuries.
Each employee must fill out an application:
Even though medical information will not cause a declination for a group, the rate needs to be established. The insurance company will evaluate the medical conditions of all the members of the group and calculate a final proposed monthly rate. The owner of the business would then decide to accept or decline the offer from the insurance company.
Small Employer Group Application:
This is the business information necessary to register the group and produce a more accurate rate. Group rating factors would include the location of the business, size of the group, and type of industry. The probationary period, group tax ID number, and all benefits are disclosed in this paperwork.
First month’s estimated premium: A check for the first month’s quoted premium is attached with the application. Typically this check is not cashed until the plan has been accepted. The check amount is usually for the quoted standard rate which could change after all medical and administrative underwriting is completed.
Our agency has over 20 years experience in the implementation of group medical plans. It is our mission to make this process as seamless as possible. We usually recommend a timeframe of 3 to 4 weeks to complete the process. |
