The post below is a guest blog from Dax Hill who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.
In preparation of the “pay or play” provision under PPACA, some employers are looking to shift contributions towards the employee portion and away from the dependents coverage. This strategy will help employers avoid penalties under 4980h of the tax code and make coverage “affordable” for the employee only portion. However, redistributing premium contributions towards employees only coverage could significantly increase the cost for those employees with dependents. These employers might assume that the dependents could then go apply for coverage though the Federal Marketplace – which works only if the employer’s open enrollment coincides with the Federal Marketplace open enrollment period. For 2014, the Open Enrollment Period was October 1, 2013–March 31, 2014. In 2015, the proposed Open Enrollment Period is November 15, 2014–February 15, 2015.
What happens if the employer increases dependent premiums during their open enrollment and the employer’s open enrollment does NOT coincide with the Federal Marketplace open enrollment? In this scenario, an increase in premium is NOT a qualifying event for the Federal Marketplace – meaning that the dependents would not be eligible to enroll for medical coverage until the next Marketplace open enrollment. Things can get more complicated assuming that your Section 125 plan runs on the same non-calendar plan year as your medical insurance plan year. If dependents decide to remain on the employer’s medical insurance plan and pay on a pre-tax basis, the dependents would not be allowed to come off of the employer’s medical insurance plan unless they experienced a life qualifying event. At which point, they would again miss the open enrollment for Federal exchange. You can see that this could become a vicious cycle and lead to frustration to both employers and employees.
There is a push to modify the regulations to allow individuals to obtain coverage mid-year through the Marketplace for non-calendar year plans. In the meantime, employers should understand the regulations and strategies allowing individuals to enroll onto the Marketplace.
Contact an HCW consultant regarding possible solutions to this problematic situation.