Health insurance regulation

Recently, the Division of Financial Regulation (DFR) requested advice from the Department of Justice (DOJ) regarding common law employee requirements for group health plan purchases. This request was in response to concerns raised with DFR that insurers could apply the standard differently; for instance, allowing an employer to access the small group market simply by offering coverage to at least one eligible common law employee, where another insurer might requiring that the common law employee be enrolled in the group health plan.

DOJ’s advice concluded that under both the federal Employee Retirement Income Security Act (ERISA) and the Small Business Health Options Program (SHOP), if an employer purchases a plan with the intent to obtain coverage for the employee under the plan, the plan must have at least one common law employee enrolled as a participant. A participant is considered a common law employee if the employer has the authority to direct and control the manner in which the services are performed by the individual. DFR is bound to follow and apply this advice to insurance participants in the small group market.

As a result of this clarification, existing employer groups that do not have at least one common law employee enrolled in coverage — the affected groups — may lose eligibility to continue purchasing a group health benefit plan.

The requirement to have at least one common law employee enrolled in coverage applies “on the first day of the plan year.” Accordingly, carriers may not terminate an affected group in the middle of a plan year based solely on the absence of an enrolled common law employee.

However, at the time of an affected group’s renewal, an Oregon insurance carrier may require an affected group to demonstrate the existence of at least one enrolled employee at the start of the plan year. If the group is unable to do so, the insurance carrier may refuse to renew the affected group on a group health benefit plan. If the non-renewing carrier offers individual health benefit plans, the carrier must simultaneously offer each member of the affected group the opportunity to purchase any of the carrier’s individual health benefit plans.

Any former members of an affected group that lose coverage in this scenario will qualify for a special enrollment period based on a loss of minimum essential coverage. Accordingly, all insurance carriers that offer Oregon individual health benefit plans must accept any former enrollee of an affected group who applies for individual coverage within 60 days of the non-renewal.

DFR expects that insurance carriers will implement the DOJ interpretation in a manner consistent with this guidance.

For further information, please see the DOJ memo at: http://dfr.oregon.gov/business/insurance-industry/health-ins-regulation/Documents/doj-memo-commonlaw-employee.pdf.

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Questions

Rick Blackwell
Policy Section Manager
503-947-7056
Richard.Y.Blackwell@oregon.gov

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