07-07: "Small Employer Health Insurance Availability Act"

To:          All Health Insurers

From:     Linda Bohrer, Director

Re:         “Small Employer Health Insurance Availability Act” “eligible employee” definition

Date:      December 3, 2007

Effective January 1, 2008 groups of two employees and groups of 26 to 50 employees will become “small employers” subject to Missouri’s “Small Employer Health Insurance Availability Act” (§§379.930 - 379.952 RSMo).  This means that provisions of law that previously only applied to groups of 3 to 25 employees will now apply more broadly.  This bulletin is intended to remind all carriers providing coverage in the small group market of the requirement to provide coverage to all “eligible employees” and their dependents so that they can bring their current plans and procedures into compliance in anticipation of the January 1, 2008 effective date.

§2711 (42 USC gg-11) of the federal “Health Insurance Portability and Accountability Act of 1996” (HIPAA) requires, in subsection (a), paragraph (1), that:

[Each health insurance issuer that offers health insurance coverage in the small group market in a State … must accept for enrollment under such coverage every eligible individual (as defined in paragraph (2)) who applies for enrollment during the period in which the individual first becomes eligible to enroll under the terms of the group health plan ….

Paragraph (2) of subsection (a) goes on to state, in part, that the term “eligible individual” is to be defined, “in accordance with all applicable State laws governing such issuer and such market.”  Clearly, HIPAA defers to the individual states’ laws to further define who will be eligible for coverage under a small employer group health insurance plan in a manner consistent with HIPAA.

§379.940.2 RSMo contains a similar provision (previously designated subdivision (5), paragraph (a); but now designated subdivision (3), paragraph (a)) that requires “small employer carriers” to offer coverage to all “eligible employees” and their dependents.  §379.930.2(15) RSMo defines “eligible employee” as follows:

“Eligible employee”, an employee who works on a full-time basis and has a normal work week of thirty or more hours. The term includes a sole proprietor, a partner of a partnership, and an independent contractor, if the sole proprietor, partner or independent contractor is included as an employee under a health benefit plan of a small employer, but does not include an employee who works on a part-time, temporary or substitute basis. For purposes of sections 379.930 to 379.952, a person, his spouse and his minor children shall constitute only one eligible employee when they are employed by the same small employer;

By adding the phrase “and has a normal work week of thirty or more hours” after “full-time basis,” the drafters of the NAIC model law upon which Missouri’s law is based intended to draw a clear line of separation between full-time employees, who must be offered coverage, and part-time employees, who are not required to be offered coverage.  A review of the model’s legislative history, which contains discussions about lowering the number of hours to something less than 30, clearly supports this.  Consequently, a small employer carrier is prohibited under §§379.930 and 379.940 RSMo from issuing a group health plan to a small employer that establishes eligibility criteria greater than 30 hours per week and is prohibited from establishing stricter eligibility criteria upon renewal pursuant to §379.938 RSMo.

Small employer carriers are cautioned to review all their in-force policies along with their current underwriting and renewal procedures for groups of 2 to 50 employees to make sure they are in compliance with these eligibility requirements of Missouri law.