Massachusetts Healthcare Reform Special Open Enrollment
05/09/2007
We are sending this update to you in response to a recent offer by both Harvard Pilgrim and Blue Cross Blues Shield of Massachusetts to allow their employer groups to hold special open enrollments for July 2007. The offer by these two carriers is intended to allow previously waived eligible employees to enroll in an employer’s health plan in order to satisfy the new state mandate requiring all residents age 18 and above to carry health insurance. Although on the surface it seems that offering this option to employees is something you may want to do, we have uncovered several issues that you need to be aware of prior to deciding whether or not to offer the open enrollment. As an employer in the state you are NOT required by this new law to hold a special open enrollment for employees who have previously waived coverage during your normal open enrollment period. The new law does require health insurance carriers to enroll uninsured residents into an individual plan, without restrictions on pre-existing conditions, as of July 1, 2007 in order to comply with the new Individual Mandate. Special Open Enrollment The open enrollment period is a requirement for insurers and HMOs to allow uninsured individuals to elect coverage under the insurers’ individual health insurance contracts so the individuals can meet the coverage requirements of the Massachusetts Health Care Reform Act. In the event an employer does accept this offer for an additional open enrollment period, we have been advised by our ERISA Counsel that the employer could not allow its new group health plan participants to participate in the existing cafeteria plan and make pre-tax contributions. Under the federal rules for cafeteria plans, an employee who elected to refuse coverage under his employer’s cafeteria plan cannot make a mid-year change to this election, unless he has a “status change” event. An employer’s second open enrollment period would not, by itself, be a status change event, so an employee who joins the employer’s plan during the additional open enrollment period would have to do so on a post-tax basis and would not be able to make pre-tax payments through the cafeteria plan. In addition, if you have over 50 employees and allow for the open enrollment, you may be subject to a revised rating of your existing contract. If enrollment increases by +/- 10%, the carriers reserve the right to re-rate your plan off-anniversary. Cafeteria Plan Amendments It is highly likely that all cafeteria plans will have to be amended to meet the new Massachusetts requirements. We would be happy to assist Yozell clients in this regard, if you so desire. However, we are waiting until final regulations are issued before we advise you to develop amendments to your existing Section 125 plan documents. At this point, all covered employers, i.e. having 11 or more full-time employees, must meet these regulatory requirements and submit the cafeteria plan to the Connector by July 1. We will notify all clients of the necessary steps to comply with this provision of the law as soon as the Connector issues this information. A public hearing on the cafeteria plan regulations was held on April 27, 2007 to “gather comments, ideas and information” to discuss these regulations. Hopefully, much of the confusion (e.g., information on required amendments, if any) will be cleared up shortly and give employers enough time to adopt (or amend) premium conversion plans to meet the Connector's requirements. If not, it is a possibility that the effective date of the regulations will be delayed. Attached please find additional information from the Commonwealth Health Insurance Connector Authority. We will keep you aware of all developments and how they will impact your company. In the meantime, please let us know if you have any additional questions.
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