For the last several months, individual health insurance applications in Colorado have included a new set of questions to determine whether an applicant’s premiums are going to be paid or reimbursed by an employer.
I’m using an Anthem Blue Cross Blue Shield application for the specific wording, but the questions are standard and state-mandated on all individual applications in Colorado now, so it should be nearly the same regardless of the carrier.
The first question asks: “Will an employer of fifty (50) or fewer eligible employees be paying for or reimbursing any applicant through wage adjustment, a health reimbursement arrangement or otherwise for any portion of the premium on the policy being applied for?”
If the answer is NO, the applicant can skip the rest of the section about employer reimbursement and continue on with the application.
But if the answer is YES, there are other questions. The second one asks: “Did the employer have a small group health benefit plan providing coverage to any employee in the twelve months prior to the date of this application?”
If the answer to that question is NO, the applicant can skip the rest of the section and continue with the application. But if the answer is YES, there is a notification that says “the applicant cannot be issued an individual policy with the premiums, or portion thereof, paid or reimbursed by the employer. Although the policy being applied for cannot be funded by an employer, the applicant may still be eligible for coverage paid by himself or herself. If the applicant wishes to apply for an individual policy of insurance where the applicant will pay the premiums, the applicant should continue completing the rest of the application and answer question 3.”
Question 3 reads: “Do you agree to apply for an individual policy of insurance and pay all of the premiums without the financial assistance of your employer?“
We’ve recently had some clients whose applications have been declined by Colorado health insurance carriers because they were applying for an individual policy, checked YES with regards to their employer funding all or part of the premiums, and also checked YES to the question about their employer offering a group policy within the past 12 months.
In one case, the client misunderstood the question and thought that since he was using money he earned at his job to pay for his health insurance, that he should answer YES to the first question. In fact, he should have answered NO, but confusion over the wording on health insurance applications is quite common (particularly the legally-required language on sections like the HIPAA eligibility, Business Group of One eligibility, and now the employer funding of premiums questionnaire).
In the other cases, the clients answered truthfully and ended up being declined for coverage. They can opt to pay for their own policies and get approved for coverage, but they may be relying on the employer reimbursement in order to be able to afford the premiums.
I understand the logic behind the one year rule that was written into Senate Bill 19. Although lawmakers are allowing small businesses to provide some money towards individual health insurance premiums, they would prefer that this option be used by small businesses that would otherwise not provide any health insurance benefits at all. Group health insurance – which, unlike individual policies, is guaranteed issue – is the way that regulators prefer to see employees get coverage. So they want to discourage small businesses from dropping their existing group health insurance plan and switching to an HRA or some other means of reimbursing employees for individual policies. Such a move would likely save the employer money, but would leave unhealthy employees with few options for coverage (possibly only CoverColorado, the state high risk pool).
And that all makes sense. Having employers wait 12 months after dropping a group plan before they can begin reimbursing employees for health insurance premiums is likely to cause more employers to keep their group plan in place. But what about the employers who just can’t afford to continue their group plans? We know that as healthcare costs have risen over the last decade, the percentage of small businesses that offer group health insurance has declined. As premiums continue to rise each year, additional businesses will simply be unable to continue their group health insurance plans. They might be able to come up with a smaller amount of money that they could give to employees in the form of health insurance reimbursement. But SB19 prevents that option for a year.
I know that the law was written with good intentions, but we’re noticing that it’s the employees – the applicants who are trying to get individual health insurance policies – who get the short end of the stick. It’s the employees who end up getting their health insurance application declined. It’s the employees who end up having to pay for their own premiums in order to obtain coverage, even if they thought that they were going to be able to rely on some level of reimbursement from their employer.