At Schuetz Insurance, we’re committed to helping Indianapolis businesses make informed decisions about their health plan offerings. As a locally-based agency with over 80 years of service, we understand the importance of providing affordable, compliant health benefits that meet both business goals and employee needs. Our expertise in navigating eligibility rules ensures that employers can confidently offer compliant, efficient plans that benefit their workforce.

When structuring your group health plans, staying compliant with federal guidelines and aligning with the company’s values is essential. Here’s a straightforward guide on the “do’s” and “don’ts” of health plan eligibility to keep your offerings on track.

 

Eligibility Do’s: Best Practices for Compliance and Fairness

When it comes to structuring eligibility within your health plans, following the rules set by regulatory bodies ensures that your organization not only complies with the law but also builds trust within your workforce. The following best practices cover essential “do’s” for eligibility, helping businesses create fair and legally sound health plans that resonate with employees.

 

Follow the Terms of Your Plan Document

The written document for your health plan is your guidebook for eligibility and coverage. Strict adherence to these terms is crucial for compliance with the Employee Retirement Income Security Act (ERISA). By following the set eligibility criteria outlined in the document, you help protect your business from claims of discrimination or favoritism, which can damage trust and create legal exposure. Regularly reviewing the plan document and ensuring all administrative actions align with its rules supports a fair and consistent approach, instilling confidence in employees that they are treated equitably within the company’s health coverage offerings.

 

Provide Affordable Coverage for Full-Time Employees (Applicable Large Employers Only)

For businesses classified as Applicable Large Employers (ALEs), providing affordable coverage to full-time employees is more than just good practice—it’s a legal obligation. The Affordable Care Act (ACA) requires ALEs to offer health plans that meet affordability and minimum value requirements to avoid penalties under the ACA’s “pay-or-play” rules. Affordable coverage means that the employee’s contribution should not exceed a specific percentage of their household income. Although this mandate applies to ALEs specifically, other employers may benefit from following similar standards to ensure that employees feel supported, which can lead to greater job satisfaction, loyalty, and reduced turnover.

 

Extend Coverage to Adult Children up to Age 26

The ACA requires employers to extend health plan coverage to adult children of plan participants until they reach age 26. This provision applies regardless of the child’s financial dependency, residency, employment status, or marital status. By allowing employees to keep their children covered during these formative years, you enhance the stability and appeal of your health plan. Ensuring young adults remain insured under a parent’s plan promotes your organization as family-friendly and responsive to employee needs, helping you attract and retain a diverse and loyal workforce.

 

Maintain Coverage for Medicare-Eligible Employees

If your company’s group health plan is primary to Medicare, you must follow the Medicare Secondary Payer (MSP) rules, ensuring that employees eligible for Medicare are still given the option to participate in your health plan. These regulations prevent employers from pressuring Medicare-eligible employees to leave the company’s health plan, which helps maintain fair and equal access to benefits. By upholding this rule, your organization shows a commitment to supporting all employees, including those who may be approaching retirement age, and strengthens a culture of inclusivity.

 

Eligibility Don’ts: Avoiding Common Pitfalls in Health Plan Compliance

While understanding eligibility “do’s” helps set a strong foundation, knowing what to avoid is equally important. Here are some “don’ts” to keep your health plan compliant and shield your business from unnecessary risk or penalties.

 

Avoid Offering Coverage to Nonemployees

Offering health coverage to nonemployees, such as independent contractors or freelancers, can create significant complications, including establishing a Multiple Employer Welfare Arrangement (MEWA). MEWAs are subject to additional regulatory scrutiny and compliance requirements that can expose your business to risks and penalties. By reserving health plan eligibility strictly for employees, you prevent unnecessary regulatory exposure and maintain a streamlined, compliant benefits structure. It’s best to review employment classifications periodically to ensure all covered individuals meet the employee status criteria.

 

Limit Waiting Periods to 90 Days

The ACA enforces a maximum waiting period of 90 days for employer-sponsored health plans, meaning that new employees should be eligible for health coverage within this period. While an orientation period can be used to familiarize employees with your organization, it must still fit within the 90-day window. Ensuring that employees have timely access to health coverage promotes a positive onboarding experience and aligns with ACA standards, showing employees that you value their well-being from the beginning of their employment.

 

Be Mindful of Nondiscrimination Requirements

Nondiscrimination rules for health plans, particularly self-insured plans and Section 125 cafeteria plans, prohibit employers from favoring highly compensated employees. By maintaining a balanced approach, you protect your organization from potential tax penalties and ensure that your health benefits are equitably distributed. Regularly assessing your health plan’s design and consulting with legal or HR advisors can help keep your plan compliant while avoiding unintended favoritism.

 

Do Not Exclude Employees Based on Health Factors

Federal law prohibits discrimination in eligibility, premiums, or coverage based on health-related factors, a rule set by the Health Insurance Portability and Accountability Act (HIPAA). Ensuring that all employees, regardless of their health status, have equal access to health coverage fosters a supportive and inclusive workplace environment. This approach builds goodwill among employees, promoting a culture of diversity and respect within your organization. By following HIPAA guidelines, you also protect your business from potential legal challenges related to health-based exclusions.

 

Compliance Made Easy with Schuetz Insurance

Understanding health plan eligibility can be complex, but with Schuetz Insurance, you gain a partner who simplifies the process. Our dedication to the Indianapolis community means we’re here for local businesses, offering practical, compliant solutions that meet each organization’s unique needs. By choosing Schuetz, you’re investing in both your employees’ well-being and your company’s future.

If you have questions or need help ensuring compliance with health plan eligibility standards, contact us today. At Schuetz Insurance, we make navigating health plan requirements easy, giving you more time to focus on what matters most—your business.