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What Makes a Carrier Offered Enrollment Special?

 March 27 2020     Shelly Hodges-Konys

Many health insurance carriers are responding to the COVID-19 pandemic by offering employees who chose to waive their employer health insurance coverage an opportunity to enroll now.  But, what makes this event “special”? Well, a pandemic makes this a special event because this is not a Special Enrollment in accordance with the Health Insurance Portability and Accountability Act (HIPAA).

HIPAA provides that group health plans give participants an opportunity to enroll in health plan coverage in certain circumstances if a participant chose not to enroll when first eligible.  HIPAA’s special enrollment events include loss of other coverage, gaining a new dependent, and becoming eligible or losing eligibility for premium assistance through programs like Medicaid or the Children’s Health Insurance Program.   Recent events and legislation haven’t changed these requirements and they still apply to all group health plans.  So, while an insurer might be offering an opportunity to enroll in coverage right now, that opportunity is not a HIPAA Special Enrollment. 

So, what does this mean and what should an employer do? It means that an employer is not legally required to offer enrollment just because an insurer offers the opportunity.  In fact, it’s a little more complicated than it seems at first glance. The reasons why involve the rules that govern pre-tax plans, whether an employer uses a benefits administration or online enrollment system, and the potential risk to the group health plan. 

First, offering a “special” enrollment to employees who waived coverage now, does not create a Section 125 change in status event for employers that allow pre-tax premium contributions through payroll.  Only a HIPAA special enrollment where there is a loss of other coverage or another mid-year qualifying event (which this wouldn’t be without the employee having an additional circumstance) would allow an employer to take pre-tax premium deductions under normal circumstances. Therefore, employers that have pre-tax plans under Section 125 could be seen as violating their plan and the regulations if they allow pre-tax payroll deductions for coverage offered through this carrier “special” enrollment.  If an employer wants to take advantage of this offering, a safer approach (assuming the IRS doesn’t release additional guidance) would be for employees who enroll through this insurer special enrollment to have their contributions come out on an after-tax basis.   If an employer does not already have a payroll code set up, it will take a little extra work to manually process the changes or program a new code. 

Second, benefits administration systems can be incredibly complex because it takes work to program these rules-based systems.  We’ve heard many employers complain about the time it takes to program changes in preparation for open enrollment and the expense to have changes programmed into the system.  Can you imagine what it will be like if every insured client reaches out to their benefits administration vendor to program a change at once?

Last, employers must consider the reasons why individuals who were eligible to enroll in coverage when it was first available.  The unfortunate reality is that inviting employees onto the plan could expose the plan to subpar risk creating adverse selection driving plan costs up.  Anyone who had other coverage and lost it would be eligible to enroll in the plan under the HIPAA Special Enrollment rules mentioned above. 

So, while a “special” enrollment sounds nice and gives everyone the warm and fuzzies, employers should give it a little more consideration before moving forward.

Please contact your HORAN representative for additional information.