Why use the Covered California for Small Business as opposed to going direct?

The Covered California for Small Business market offers the following products and services:

1. Access to competing health insurance plans
2. Access to multiple coverage options
3. Access to tax credits
4. Benefits administration
5. Enrollment support
6. Online account management
7. Customer service

Is there a group open enrollment period?

Small businesses have the option to enroll throughout the year according to their policy’s renewal date or whenever they choose.

Is the employer application discussed in slide 8, section 6 of the training binder only for the employer application or does it include all the employee applications too?

For the paper applications, the employer application form as well as the employees’ completed, signed applications are sent in. For online applications, the employer first submits the employer application including the employee roster then the employee submits his or her application.

See employer and employee paper applications:

http://www.coveredca.com/PDFs/paper_application/SHOP-Employer-Application.pdf

http://www.coveredca.com/PDFs/paper_application/SHOP-Employee-Application.pdf

If an employer has a majority of employees in California and goes through Covered California for Small Business for coverage, what happens to their out-of-state employees?

Covered California for Small Business will look first at an employee’s ZIP Code. If that ZIP Code is not a CA code they then look at the employer’s main business address for rating. As for networks, the employee should pick a plan that has an out-of-state network.

If a small business has three employees husband, wife, and daughter with a W-2, can they qualify for Covered California for Small Business?

In order to be eligible for the Covered California for Small Business, an employer must be a “small employer” as defined in state law.  (10 CCR 6522(a)(1)). A “small employer” is defined as an any person, firm, partnership that … employed at least one , but no more than 100 eligible employees, … and in which a bona fide employer-employee relationship exists. (See Health and Safety Code 1357.500(k) and Insurance Code 10753.14). With a group of one, or a group of several, but all are owners or partner, a bona fide employer-employee relationship does not exist.

Likewise, federal rules preclude this type of group from qualifying as a “small employer” eligible to participate in the Covered California for Small Business. Section 1304 of the Affordable Care Act defines “small employer” as an employer who employed “at least 1 employee on the first day of the plan year,” but no more than 100 employees on average in the preceding calendar year. (ACA § 1304(b)(1)( 2); 42 U.S.C. § 18024(b)(1)(2)). In the preamble to the final rules on this issue, the federal government explains that the regulations and the ACA have based the definitions of “employer,” “employee,” and “small employer” on long-standing definitions in section 2791 of the Public Health Service Act (PHS Act).  (77 Fed. Reg. 18399 (March 27, 2012)). Specifically, the definition of “employee” in the PHS Act is incorporated by reference to section 3(6) of the Employee Retirement Income Security Act (ERISA), which defines the term employee the same as it is defined under common law to mean “any individual employed by an employer.” (29 U.S.C. § 1002(6); See also Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992) (holding that the term “employee” as used in ERISA refers to common law principles)). Thus, to be eligible for Covered California for Small Business “the employer must employ at least one common law employee.” (77 Fed. Reg. 18399 (March 27, 2012)).

Therefore, under both state and federal law, a group must employ at least one employee and must have some sort of employer-employee relationship. In the case where there is only one individual, or several individuals who are owners or partners, irrespective of whether any of them is issued a W-2, an employer-employee relationship does not exist and is therefore not eligible for Covered California for Small Business coverage.

Can a small business with several partners and no W-2 employees qualify for Covered California for Small Business?

In order to be eligible for the Covered California for Small Business, an employer must be a “small employer” as defined in state law.  (10 CCR 6522(a)(1)). A “small employer” is defined as an any person, firm, partnership that … employed at least one, but no more than 100 eligible employees, … and in which a bona fide employer-employee relationship exists. (See Health and Safety Code 1357.500(k) and Insurance Code 10753.14). With a group of one, or a group of several, but all are owners or partner, a bona fide employer-employee relationship does not exist.

Likewise, federal rules preclude this type of group from qualifying as a “small employer” eligible to participate in the Covered California for Small Business. Section 1304 of the Affordable Care Act defines “small employer” as an employer who employed “at least 1 employee on the first day of the plan year,” but no more than 100 employees on average in the preceding calendar year. (ACA § 1304(b)(1)( 2); 42 U.S.C. § 18024(b)(1)(2)). In the preamble to the final rules on this issue, the federal government explains that the regulations and the ACA have based the definitions of “employer,” “employee,” and “small employer” on long-standing definitions in section 2791 of the Public Health Service Act (PHS Act). (77 Fed. Reg. 18399 (March 27, 2012)). Specifically, the definition of “employee” in the PHS Act is incorporated by reference to section 3(6) of the Employee Retirement Income Security Act (ERISA), which defines the term employee the same as it is defined under common law to mean “any individual employed by an employer.” (29 U.S.C. § 1002(6); See also Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992) (holding that the term “employee” as used in ERISA refers to common law principles)). Thus, to be eligible for Covered California for Small Business “the employer must employ at least one common law employee.” (77 Fed. Reg. 18399 (March 27, 2012)).

Therefore, under both state and federal law, a group must employ at least one employee and must have some sort of employer-employee relationship. In the case where there is only one individual, or several individuals who are owners or partners, irrespective of whether any of them is issued a W-2, an employer-employee relationship does not exist and is therefore not eligible for Covered California for Small Business coverage.

Can agents assist employers with the online application?

Yes.

Are there going to be paper applications?

Yes, please note that online applications have been delayed until Fall 2014.

Employer Application:
http://www.coveredca.com/PDFs/paper_application/SHOP-Employer-Application.pdf

Employee Application:
http://www.coveredca.com/PDFs/paper_application/SHOP-Employee-Application.pdf

Can agents run quotes without creating an employer account?

Online enrollment and account management has been delayed until Fall 2014.

If a group decides to cancel group coverage and get employees to sign-up for individual coverage, can a group start a carve-out plan for owners and key executives?

A plan cannot discriminate in favor of highly compensated individuals as to eligibility to participate; and the benefits under the plan cannot discriminate in favor of highly compensated individuals.  Highly compensated individual is defined as (1) one of the 5 highest paid officers; (2) a shareholder who owns more than 10 percent in value of the stock of the employer; or (3) among the highest paid 25 percent of all employees.

However, please be aware that on September 13, 2013, the IRS and the DOL issued guidance 2013-54 (“guidance”) on the application of certain ACA provisions on HRAs, reimbursement arrangements or employer payment plans, and health FSAs.  Due to the pouring in of questions regarding the guidance, the IRS issued a clarifying FAQ on May 13, 2014.  However, the guidance is complex and many questions still abound.

The guidance changes the landscape for certain employer-sponsored arrangements in that arrangements that facilitate the pre-tax payment or reimbursement of premiums for individual medical coverage for active employees are no longer permissible.  HRAs and other similar defined contribution arrangements for active employees are also impermissible unless they are “integrated” with an employer’s group health plan or the reimbursement under such arrangements are limited to retirees or certain excepted benefits.