Topic:
HEALTH INSURANCE; SMALL BUSINESSES;
Location:
INSURANCE - HEALTH; SMALL BUSINESS;

OLR Research Report


August 7, 2008

 

2008-R-0447

SMALL EMPLOYER HEALTH INSURANCE AND EMPLOYEES WORKING FEWER THAN 30 HOURS A WEEK

By: Janet L. Kaminski Leduc, Senior Legislative Attorney

You asked if Connecticut law makes it illegal for a small business owner to offer health insurance to employees who work fewer than 30 hours a week.

The Office of Legislative Research is not authorized to render legal opinions and this report should not be considered one.

SUMMARY

Connecticut law does not make it illegal for a small business owner to offer health insurance to employees who work fewer than 30 hours a week. Rather, it references employees who work 30 hours or more a week, so called “eligible employees,” in a formula that determines if an employer is a “small employer” for purposes of certain health insurance statutes. The law sets various requirements for small employers and extends certain protections and requirements to their “eligible employees.” But it does not prohibit a small employer from offering a health insurance plan to employees working fewer than 30 hours a week or negotiating with insurers to develop such a plan.

SMALL EMPLOYER AND ELIGIBLE EMPLOYEE DEFINITIONS

For purposes of applying certain health insurance statutes, Connecticut law defines a “small employer” as any person, firm, corporation, limited liability company, partnership, or association that:

1. is actively engaged in business or self-employed for at least three consecutive months and

2. on at least 50% of its working days during the preceding 12 months, employed no more than 50 “eligible employees,” the majority of whom were employed within Connecticut (CGS 38a-564(4)).

In determining the number of “eligible employees:”

1. companies that are affiliated or eligible to file a combined tax return are considered one employer;

2. employees covered through the employer by a health insurance plan issued to, or in accordance with, a trust established under collective bargaining are not counted; and

3. employees not actively at work but covered under the small employer's health insurance plan under workers' compensation or federal continuation of benefits requirements established by the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), or other applicable laws, are not counted.

Otherwise, an “eligible employee” is an employee who works on a full-time basis, with a normal work week of 30 or more hours, but does not include an employee who works on a part-time, temporary, or substitute basis. “Eligible employee” includes a sole proprietor, a partner of a partnership, or an independent contractor, provided such sole proprietor, partner, or contractor is included as an employee under a small employer's health care plan (CGS 38a-564(3)).

“Small employer” does not include a:

1. municipality, association of personal care assistants, or community action agency, purchasing health insurance through the Municipal Employee Health Insurance Program (MEHIP);

2. nonprofit organization purchasing health insurance through MEHIP, unless the secretary of the Office of Policy and Management and the state comptroller make a request in writing to the insurance commissioner that the nonprofit organization be deemed a small employer for the purposes of the health insurance statutes; or

3. private school in Connecticut obtaining health insurance through a health insurance plan or an insurance arrangement that an association of private schools sponsors.

IMPLICATION OF 30-HOUR CRITERIA

Some Connecticut health insurance laws, including those described below, apply specifically to small employers and their “eligible employees.” If the small employer offers coverage to employees who work fewer than 30 hours a week, these laws do not apply to those employees.

Guaranteed Renewable Coverage

Health insurance plans issued to small employers are “guaranteed renewable” to the eligible employees. That is, the insurance policy is renewable, for the eligible employees and their dependents, at the small employer's option, with some exceptions (e.g., nonpayment of premium, fraud, material misrepresentation, noncompliance with the insurer's required participation rate (number of enrollees) (CGS 38a-567)(1)).

Coverage Eligibility

Except in the case of a late enrollee who has failed to provide evidence of insurability satisfactory to the insurer, the health insurance plan may not exclude any eligible employee or dependent who would otherwise be covered under the plan on the basis of an actual or expected health condition. A health insurance plan may not exclude an eligible employee or dependent who, on the day before the initial effective date of the plan, was covered under the small employer's previous health insurance plan through workers' compensation, COBRA, or other applicable laws, but the employee or dependent must request coverage under the new plan on a timely basis (CGS 38a-567(2)).

Late Enrollment

A “late enrollee” is an eligible employee or dependent who requests enrollment in a small employer's health insurance plan after the initial enrollment period for which the employee or dependent was eligible (CGS 38a0-564(9)). An eligible employee or dependent is not considered a late enrollee if:

1. the request for enrollment is made within 30 days after his or her coverage under another group health insurance plan terminated and (a) he or she had not initially requested coverage under the small employer's plan solely because of this other coverage, (b) that other coverage ceased due to (i) termination of employment, death of a spouse, or divorce or (ii) that plan's involuntary termination or cancellation by its carrier for reasons other than nonpayment of premium; or

2. the eligible employee or dependent is employed by an employer who offers multiple health insurance plans and he or she elects a different health insurance plan during an open enrollment period;

3. a court has ordered coverage be provided for a spouse or minor child under a covered employee's plan and request for enrollment is made within 30 days after the court order is issued; or

4. the request for enrollment is made within 30 days after the employee's marriage or the birth or adoption of the employee's first child.

Connecticut Small Employer Health Reinsurance Pool

State law mandates that all insurers be members of the Connecticut Small Employer Health Reinsurance Pool (CGS 38a-569). The pool issues reinsurance coverage to insurers who wish to relinquish liability for a small employer's eligible employees' or dependents' covered expenses in excess of $5,000 per covered person.

Any member may reinsure with the pool coverage of a small employer's eligible employee or dependent, except any whose premium rates are not subject to CGS 38a-567, which requires insurers to use adjusted community rating for small employers and prohibits the use of health status or claims experience in setting rates. (Adjusted community rating uses the same base rate for all groups, but then adjusts it for a specific group's case characteristics as allowed by law (e.g., age, gender, location, industry, family composition).)

Special Health Care Plans

A “special health care plan” is a health insurance plan for previously uninsured small employers established by the Connecticut Small Employer Health Reinsurance Pool board of directors (“the board”) or the Health Reinsurance Association (“HRA”) in accordance with statutory requirements (CGS 38a-564(11)). The law requires the board to develop special health care plans as a lower-cost health insurance coverage option for uninsured small employers.

A small employer is eligible to purchase a special health care plan if it did not maintain health insurance coverage for its employees at any time during the one-year period before applying for the special health care plan. Also, a small employer is prohibited from purchasing a special health care plan for more than three years (CGS 38a-565(2)).

The Health Reinsurance Association (HRA) may issue “special health care plans” to small employers with 10 or fewer eligible employees, the majority of whom are low-income eligible employees (CGS 38a-570). A “low-income eligible employee” is a small employer's full-time employee, with a normal work week of 30 or more hours, whose annualized wages from that employer are less than 300% of the federal poverty level (CGS 38a- 564(19)).

HRA's board of directors must establish premium rates based on recommendations of its actuarial committee. When developing its recommendations, the committee must consider the premiums other insurers are, or would be, charging for similar insurance, among other pertinent information (CGS 38a-570(1)). For the purpose of establishing the premium rates, the law permits the HRA board to consider any relevant factors impacting premium, claims, and expenses that other insurers may consider when setting premium rates, including characteristics of small employers and insureds. It also:

1. requires an anticipated loss ratio of at least 80%; and

2. requires HRA to administer the special health care plans issued to small employers without gain (i.e., profit) or loss (CGS 38a-570(1)) and

3. subjects the premium rates to CGS 38a-567, which requires insurers to use adjusted community rating for small employers and prohibits the use of health status or claims experience in setting rates.

JKL:dw