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Employers must adhere to crucial eligibility requirements for health coverage, categorized into important "do's" and "don'ts." This includes offering affordable coverage to full-time employees, extending coverage to adult children up to age 26, and providing coverage for Medicare-eligible employees as the primary payer. Important "don'ts" include offering coverage to nonemployees, imposing waiting periods over 90 days, and excluding employees based on health status-related factors.
Eligibility Do’s
Do Offer Affordable Coverage to Full-time Employees (ALEs Only)
The ACA requires ALEs to offer affordable, minimum-value health coverage to full-time employees or potentially pay a penalty. ALEs must have at least 50 full-time employees to be subject to these rules. Penalties apply if full-time employees don't receive health coverage meeting certain criteria. Identifying full-time employees is crucial, defined as those working at least 30 hours per week or at least 130 hours per calendar month.
Do Offer Coverage for Adult Children up to Age 26
The ACA requires health plans to provide coverage for adult children up to age 26, regardless of financial dependency, residence, student status, employment, or marital status. Premiums cannot vary based on age for adult children, who must receive the same benefits and pay the same amount as other plan participants.
Do Continue to Cover Medicare-eligible Employees
Medicare's coordination of benefits rules determine which payer covers health care claims first, with employer-sponsored health plans typically being primary for individuals eligible for Medicare due to age. Employers with group health plans primary to Medicare must provide equal benefits to employees aged 65 or older, cannot incentivize Medicare beneficiaries to not enroll in their plan, and must not consider Medicare entitlement when offering coverage.
Do Follow the Terms of the Plan Document
To comply with ERISA, health plans must have an official written document outlining benefit and eligibility rules for employees and dependents. This document should detail enrollment eligibility criteria, waiting periods, and other conditions. It typically includes benefit descriptions from insurers, a "wrap" document combining benefits, and fulfills ERISA's documentation requirements. Employers must adhere to this document in daily operations to meet fiduciary duties, review it regularly, and avoid deviating from eligibility rules to prevent potential discrimination or self-insured liability.
Eligibility Don’ts
Don’t Impose a Waiting Period Exceeding 90 Days
The ACA prohibits group health plans from imposing a waiting period exceeding 90 days before coverage becomes effective. Eligibility conditions based on job classification are allowed, and an orientation period, not exceeding one month, may be required for coverage eligibility.
Don’t Offer Coverage to Nonemployees
Employers should only offer health plan coverage to their employees to avoid creating a multiple employer welfare arrangement (MEWA). Offering coverage to nonemployees like independent contractors can lead to legal and financial consequences due to potential misclassification issues.
Don’t Exclude Employees Based on Health Factors
The Health Insurance Portability and Accountability Act (HIPAA) prohibits discrimination in group health plans based on health status factors, including health, medical history, and genetic information. Plans cannot differentiate eligibility or premiums based on health factors and must not require physical exams for enrollment.
Don’t Overlook Nondiscrimination Requirements
Federal tax law requires nondiscrimination in certain employee benefits, such as self-insured health plans and Section 125 cafeteria plans. Noncompliance can result in the loss of tax benefits for highly compensated employees.
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Additional Resources
IRS’ Q&A on ACA’s pay-or-play rules for ALEs
Final rules on ACA’s age 26 requirement for young adults
Final rules on HIPAA’s nondiscrimination rules related to health status-related factors
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.
