Double coverage

[3Saints]

I am in PA.

Can my company force someones spouse off our plan if they have it available through their employer. We cover about 90% of dependent cost and are aware of a few that use our plan instead of their employers? There are also a few that elect family coverage on our plan that use it as secondary coverage...we are paying $7-800 a month for a supplement.

Thank you in advance.

Joe

[cbg]

It is legal for a company to have a rule that a spouse is not eligible for coverage if they have access to coverage through their own employer. This is, in fact, becoming more and more common as the cost of health care rises.

[ecmst12]

But, you will have to redesign your plan to include this rule and it can only be at open enrollment.

[3Saints]

Can we formally adopt this policy and add it to our employee manual or does our carrier (Highmark BS) have to change something? I am aware of larger groups doing this but I know carriers are much more accomodating toward them.

Thank you for the quick replies.

[ecmst12]

The eligibility requirements are written into the policy. If you want to change the requirements, you have to change the policy.

[momm2500]

3saints

i personally handle a large group that is country wide that has implemented this provision in their medical policy. It actually is a cost containment feature that some of your larger employers are doing. yes this can only be done during open enrollment and the provision needs to be placed in the actual plan. it can be written many ways in the policy. you can have it that if the spouse is employed and the spouse's employer offers them health insurance, they must take it before they are eligible under your plan. this way it is underwritten at a cheaper rate for the spouses on the plan.

[TIMMAAYY]

If you're company sets up a 105 plan, they can force them off at the enrollment of the plan as it is a qualifying event; ie, they are no longer eligible for your plan if their employer's plan offers them coverage.

[ecmst12]

Can be done with a 125 plan too but none of it can be done until the CURRENT plan's open enrollment. They can't make changes to the plan mid-year.

[TIMMAAYY]

I'm not going to rehash this with you, because you obviously don't understand Section 105 plans when mixed with a traditional health insurance group plan, but the Section 105 plan overrides all, and if it is written with language that makes spouses with other coverage from their employer as no longer eligible, it is a qualifying event, and they can be removed from the plan. Besides, I've already shown you in the past an example of one of the largest carriers, ANTHEM, stating on their own administration site that you don't have to wait for open ENROLLMENT to DROP dependents from your group plan, and that premiums for such are refundable.

[ecmst12]

The current plan is a contract written for a 1 year period. No changes can be made to the plan itself, including changing the eligibility criteria, during the year, only at renewal time. If the spouse was an eligible dependent at last Open Enrollment, the employer can NOT change the rules to suddenly make them ineligible in the middle of the year.

[TIMMAAYY]

If the employer starts a new benefit plan ( which is what section 105 is ), and that plan states they are no longer eligible for the group insurance plan, they can.

Do you understand what a Section 105 plan is, and what it allows? If you change their eligibility, it's a qualifying event.

Not that it's needed to drop, anyway.

You haven't read either of the books I proposed to you yet, have you.

EDIT

Don't take it from me, here is a completely unconnected site with respect to Section 105 FAQ's:

[url]http://www.emcentrix.net/adminhr/caf/section125_reimbursement_faq.htm[/url]

From the second paragraph:

Section 105 plans offer advantages to both the employer and the employees. The medical expense reimbursements are tax deductible by the employer and the employer has flexibility in the design of the plan's provisions, such as establishing maximums amounts for reimbursement and setting eligibility requirements for participation.

You can set this up at anytime during the year. Employees enroll into it, regardless of their insurance plan. The 105 plan defines what your benefits are, REGARDLESS of what insurance plan sits behind it, be it medicare, group, individual, etc. The employer can set his own rules for eligibility, as long as they pass the discrimination test, which spousal removal does. The nice thing is, they way I've used it, is that the spouses' benefits do not change, unless their own employer's plan is BETTER than than the 105 plan.

[cbg]

Section 105 HRA plans are best suited for employees of sole proprietors, corporations, limited liability companies, and partnerships. Business owners generally can't participate in a Section 105 HRA plan. This is why the spouse/employee approach has become so popular. However, C corporation and S corporation owners can participate as long as they're receving a regular paycheck as an employee.

And we know for absolutely certain that the posters company qualifies because....?

[TIMMAAYY]

It's not a question of IF they can set up a 105 plan, it's HOW they would set up a 105 plan.

Section 105 is a federal law ( IRS Tax Code ) that allows a business to "self insure", and write off medically eligible expenses as a business expense. Any business owner can do it, but it's a question of their tax status as to how they would set up their plan documents.

What they are referring to above with the spousal piece is another tool that an owner can use if their spouse is a qualified employee of the company. The business owner would hire their spouse... and it need not be in cash earnings, it can be in benefits only... and include themselves as a dependent on the spouse's plan.

LLC, S, C, Sole Proprietor... it doesn't make any difference as to IF they can do it, it's just a matter of setting up a 105 plan document in the correct manner to work in their best interest. That's why you want a good tax attorney who is familiar with Section 105 to assist you, or a good TPA/consultant that has the proper documentation for you.

The original poster is seeing what many business owners are starting to realize, and that is having double coverage is wasteful, inefficient, and unnecessary. If both spouse's employers have the "spousal" piece in place, that is, if both companies require that their employee's spouses have to take other coverage if available, each employee will be covered only under their own employer's INSURANCE plan ( not necessarily the 105 plan - that's a whole 'nutha thread ! ), and dependent children would go by the "birthday rule", falling primary on whichever parent's birthday falls first in the calender year.

[cbg]

You don't need to sell me on the idea of eliminating double coverage. When did I ever say otherwise?

[TIMMAAYY]

You didn't. I was just getting at the heart of the matter. One of my partner's new clients did this as a first step in their 105 plan, using the spousal piece, and is saving close to $1MM a year for a group of 800 employees ( around 2,000 lives ). The benefits for the spouse did not change, as they are maintained by the 105 plan.

Most people have no idea how expensive it is to pay for double coverage because they never see the actual bill broken down by employee, or they are the employee and only pay a small percentage. My home town could probably save $1MM a year too if they would just do a little research. I can name 20 friends of mine who have themselves and their spouse on the city/county/school corporation plan, double covered. I'm sure there are several hundred more.

So they are raising taxes to prevent the school's insurance trust from being depleted.

Good plan, that.