NY Small Group Health Insurance Owner Only Guidelines – Update

HealthFirst has updated their small group guidelines to be in line with most other carriers. HealthFirst will now require one common law employee enrolled for a group which has only 1 owner. They will allow for LLC, S and C corps with 2 or more owners to enroll only 1 owner if they are not husband and wife.

NY Small Group Health Insurance Owner Only Guidelines

Originally posted 4/20/2018
There are new updates to NY Small Group Health Insurance Owner Only Guidelines that might affect your ability to maintain small group health insurance for your business.

NY Department of Financial Services (DFS) has recently instructed health insurance carriers in NY State to abide by new guidance regarding the ongoing eligibility of OWNER ONLY enrolled health insurance groups. This guidance is being used to clarify what constitutes a small group under the Affordable Care Act (ACA) as well as the Employee Retirement Income Security Act (ERISA).

This new small group eligibility rule is to clarify that at least one common law employee must ENROLL into medical coverage in order to qualify for small group health insurance when the sole enrollee is the business owner. This aligns with the ERISA definition of employer sponsored group health insurance coverage and clarifies that a group may NOT consist of only a sole business owner.  To qualify for group health insurance, there must be at least one enrolling employee who meets the common law employee definition under federal rules. A common law employee is defined as someone OTHER THAN the Owner or the Owners Spouse.

If no “common law employees” are ENROLLED on the health plan other than the sole owner (100% shareholder), an employee benefit plan does not exist. The ‘owner’ or the ‘owner’s spouse’ of the business, whether paid via W2 or K1, do NOT qualify as employees under federal rules (although they can join the health plan as an employee IF there is a common law employee also enrolled or if 2 or more ‘owners’ who are not married enroll).

In essence, if your company does not qualify for an employee benefit plan, you will LOSE YOUR GROUP HEALTH COVERAGE upon renewal and be forced into the individual market where there are very limited carriers, higher premiums, and more volatility.

How does this affect you? – this new guidance is different than how insurance companies currently handle ‘owner only’ enrolled groups. Before, as long as there was a common law employee eligible, they did not have to enroll as long as the group met the participation guidelines (usually 60% after valid waivers). Now, a common law employee must enroll, and the group as a whole must meet participation, if the only enrolling person on the plan is the business owner.

How can you become compliant when only an owner(s) are enrolling on a group health plan? It depends on how your company is incorporated, how employees and owners are paid, and which insurance company you are enrolled with.

K1 only groups with 2 or more Owners on K1: This is a group with only owners paid on K1s, and no W2 employees.  These are NO LONGER ELIGIBLE for coverage under SOME carrier scenarios going forward. Notable exception is Emblem (this could change soon)…or with Oxford as long as there are 2 or more K1 owners, or with Oscar as long as 2 or more owners are ENROLLED.

K1 owner(100%) and W2 employee(s): These are NOT allowed going forward unless W2 employee ENROLLS under most scenarios, with Emblem as a noted exception. Must have at least one common law employee enrolled.

Partnerships/Sole Proprietors: No longer eligible unless a common law employee is enrolled. Partnerships file a Form K1 1065, and are treated as sole proprietors unless there is a common law employee ENROLLED.

S-Corp or C-Corp W-2 only groups: This is tricky, especially if only one member enrolling. These groups have owners listed on the NYS45. Rule is that group must have at least one common law employee enrolled, but there are some exceptions and workarounds. Emblem is notable exception.

There might be some workarounds if you don’t otherwise qualify under the guidelines above so call us to start the process of protecting your ability to stay in the small group market.

Please provide us with the following information if you want to call and discuss your specific company eligibility:
– Type of Business (S-Corp, C-Corp, LLC, LLP, Sole Proprietor)
– type of proof of employment available (NYS45, Sch C and NYS45, K1, etc)
– if you file K1s, how many owners are there in the business (needs to add up to 100% of outstanding shares)?
– Are owners listed on the NYS45, or only on the K1s?
– How many employees (including owners) are ENROLLED on the health plan?
– How many employees (including owners) have signed WAIVERS declining the health insurance?