Gaining Health Coverage for Small Businesses During the Special Open Enrollment Period
The Affordable Care Act (ACA) mandates that health insurance companies offer a one-month Special Open Enrollment Window (SOEW) annually. This period provides an opportunity for small businesses to enroll in health insurance without adhering to the usual employer contribution and employee participation requirements.
The SOEW takes place from November 15 to December 15 each year, allowing eligible small businesses to secure coverage effective January 1 of the following year.
Small group health insurance carriers must adhere to specific timeframes and regulations regarding new-business submissions during the SOEW. Word & Brown has compiled state-specific resources outlining the underwriting rules, requirements, and additional procedural information for the 2023 Special Open Enrollment Window. Access the California SOEW reference piece and Nevada SOEW reference piece for a comprehensive overview of small group carriers’ SOEW policies.
Background
The ACA stipulates guaranteed issuance of health insurance for applicants in the individual and small group markets. This implies that all health insurers in these markets must accept every employer and individual applicant seeking coverage, provided they reside within the plans’ service areas. Moreover, the ACA mandates that this guaranteed issuance of coverage is solely permitted and offered during designated open enrollment periods.
Participation and Contribution Requirements
In many states, including California and Nevada, carriers have the discretion to decline group health coverage if the enrollment rate falls below 50-70% among employees. Some carriers impose even stricter participation requirements.
Furthermore, underwriting contribution rules set forth by insurance carriers necessitate that employers contribute a specific percentage of premium costs for all employees to obtain group health coverage. Various financial and other factors may render it challenging for some businesses to meet these contribution requirements.
Addressing the Challenge: Special Open Enrollment Window
Numerous employers face difficulties offering coverage to their employees due to the complexities of meeting participation and/or contribution requirements.
Even when offering generous contributions, many employers encounter situations where younger and lower-income employees opt out of coverage.
This issue has been particularly prevalent since 2019, when the ACA’s federal individual mandate non-compliance penalty was eliminated. However, in 2020, California implemented its own individual mandate, imposing substantial non-compliance penalties for adults and families residing in the state. Nevada and most other states do not have state individual mandate requirements.
The Special Open Enrollment Window presents an opportune moment for employer groups (in the small group market) that have grappled with participation and/or contribution requirements to secure coverage for their employees.
Important ACA Consideration for Applicable Large Employers (ALEs)
It is crucial to note that Applicable Large Employers (ALEs) remain subject to the ACA’s Employer Shared Responsibility mandate – even if/when the ALE enrolls in coverage during this SOEW without meeting standard participation and contribution requirements.
The Employer Shared Responsibility mandate dictates that ALEs must offer affordable medical coverage (of minimum value) to full-time (FT) employees and their dependents up to age 26 or face potential non-compliance penalties. The affordability ratio for plan years beginning in 2024 is set at 8.39%. This means that a FT employee’s monthly contribution for the lowest-cost, minimum-value plan offered by the ALE (at the employee-only rate) should not exceed 8.39% of the employee’s monthly Rate of Pay, 2024 W-2 Box 1 income, or the Federal Poverty Level. Failure to comply with this requirement will result in the ALE not fulfilling the ACA’s employer mandate.
For further ACA details, refer to Word & Brown’s exclusive 2024 ACA Quick Reference Guide and ACA Affordability Guide.