Double Coverage

[bmedis]

What is the name of your state?

Delaware

A small company offers health insurance to its 8 employees which has coverage 02/04 through 02/05...of course, rates are determined by the number of people in the plan. One employee is going to go under his wifes coverage which is effective 01/05 through 01/06. Can the small company keep the employee on their plan for the month of January 2005 so that their rates don't increase as much as they would with one less employee or must they take him off of the plan since he would have double coverage for the month of January?
Thank You!

 

[Beth3]

This is a more complicated question than it appears.

Let's start here:

Is this a 125B Plan? What I mean is do the employees make a premium contribution off their paychecks and if so, is that deduction taken pre-tax or post-tax? This info is absolutely required before attempting to answer your question.

 

[bmedis]

Delaware

No....not a Section 125 Plan..........When I wrote the policies and procedures about 4 years ago, I put a $275 per month cap on what the employer would pay for staff heath insurance...anything over and above that monthly amount for a single adult is paid by the employee biweekly from their paycheck...I believe they currently kick in about $18 each pay period to cover the total linsurance. It is post tax....however, guess I should also mention that the owner needed a tax deduction for 2004 so we paid the employees back all of their annual (2004) out of pocket expense for heath insurance in the form of a pre-tax check.

Thank You!

 

[Beth3]

Since employee premium contributions aren't being made on a pre-tax basis, that means employees can elect to add and cancel participation at any time they wish to, subject only to whatever underwriting requirements the carrier has.

Very small group plans like this operate quite differently than large group plans which is where most of my experience has been but premiums aren't determined by the number of participants, although there may be a minimum number of participants required by the carrier to be willing to underwrite coverage. Rather, they're determined by your own claims experience, the overall losses the carrier has experienced for other group plans, and trend.

I'd be surprised if one employee cancelling coverage would have an impact on everyone else's premiums but I suppose it's possible if that dropped the group below a certain threshhold.

By the way, when the owner reimbursed employees for their out-of-pocket medical expenses with a "pre-tax" check, are you saying that that income wasn't treated as taxable income to the employees??? Unless the company was funding a MSA, HSA, or Flex Reimbursement Account for employees, those payments needed to be treated as a taxable bonus/wages.