Industry News

Treatment of Very Small Groups in the TX Group Health Market

TDI recently published revised FAQs addressing the treatment of “mom and pop” groups in the group health insurance market. The guidance is effective 12/1/2016 forward.

The following statements do not constitute legal advice. We are not attorneys and are not professionally licensed to provide such counsel.

Federal law allows states to determine the eligibility of “very small groups” for small group health coverage. Federal and state laws are not perfectly harmonious. Carriers must offer coverage to employers who satisfy at least the federal definitions or state definitions. Groups are not required to satisfy both sets of definitions in order to be eligible for small group coverage in Texas.

One area of difference involves the treatment of groups that include only spouses. Under federal definitions, an employer is required to employ at least one employee to be eligible for group health insurance. Partners in partnerships and sole proprietors and their spouses are not considered employees for the purpose of this definition because they are not “common law” employees. Thus a partnership or sole proprietorship must employ at least one full time employee.

Under state definitions, anyone (other than independent contractors) who works an average of 30+ hours a week for a group is considered an employee if the person is not covered by another valid health plan. This includes partners in partnerships and sole proprietors and their spouses. Groups consisting of at least two employees under this definition are eligible for group health insurance.

What does TDI’s recent guidance tell us?

  • Husband and wife groups could be eligible for new small group coverage.
  • Carriers can only non-renew groups that fail to comply with the terms of the plan. A group that no longer satisfies the definition of a small employer cannot be non-renewed for that reason.

We will publish updates to this article as information changes and once carriers issue their interpretations in the event the interpretations differ. This document is a selected compilation of the source regulations and guidance that TDI references in their FAQ.

  • BCBS – Modified their eligibility guidelines to comply with TDI’s guidance. The change applies to groups submitted for 12/1/2016 or later effective dates that were previously rejected as being ineligible. At our request, BCBS will reprocess any rejected cases. They will accept their current EGI form until they are able to publish a revised version of it.
  • Humana – Modified their eligibility guidelines to comply. Change applies 12/1/2016 or later effective dates. They require a Small Employer Attestation form on all groups with five or fewer subscribers.
  • Memorial Hermann – pending response
  • Scott & White – pending response
  • UHC – pending response
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