Getting to Know Your Policy: When Can Group Health Be Denied or Terminated?

The Affordable Care Act (ACA) has revolutionized access to health insurance for you and your employees, making it simpler to find the coverage you desire and need. Yet, it’s worth noting that even with ACA compliance, there’s still a chance for a policy to be declined, denied, or not renewed.

• Employer contribution does not meet the insurer’s standard

Most insurers have a minimum contribution that must be made by the sponsoring employer. In most cases, as with CaliforniaChoice, the minimum is 50% of the cost of a specific plan and/or benefit.

• The group participation level does not meet the insurer’s standard

In many states, including California, health insurance carriers can decline to issue a Group Health policy if participation is too low.

For CaliforniaChoice, coverage participation varies by group size:

• 1-2 Employees: 100% of all employees. All groups must include at least one Medical enrolled
  in CaliforniaChoice employee who is not a business owner or spouse/domestic partner of business owner.
• 3-100 Employees: 70% of eligible employees enrolling in CaliforniaChoice Medical coverage.
• 51% of all eligible employees must reside in California.

In addition, the following guidelines apply:

• For all CaliforniaChoice groups, the Home Office (principal executive office) must be in California.
• The business must have a valid Federal Tax Identification Number.
• The employer must have active Workers’ Compensation coverage.
• Employees must be permanent and actively working an average of 30+ hours per week over the course of a month, at the employer’s regular place of business or 20+ hours per normal week for at least 50% of the weeks in the previous calendar quarter.
• Applicable documentation will be requested to verify employee eligibility (such as a DE 9, Quarterly Wage Report).
• Employees must meet the employer’s selected Waiting Period, if any.
• Every employee must be paid on a salary/hourly basis (not be a 1099, commissioned, or substitute).

You might think if you’re contributing one-half or more of the premium for coverage, your employees will readily enroll in your group plan; however, even with a generous contribution toward the cost of insurance, some younger and lower-income employees may choose to waive (decline) coverage.

Coverage can also be declined or terminated due to:

• Failure to pay premium

If your group’s premium is not paid by the due date, coverage can be terminated retroactive to the last paid premium date.

• Other coverage

If one of your employees declines group coverage and enrolls in individual or family coverage through the Covered California state exchange, that could subject your business to Applicable Larger Employer (ALE) ACA penalties. If you’re not sure if your business is an ALE and is subject to the ACA employer mandate (also known as the employer shared responsibility penalties), you can use the Full-time Equivalent Employee Calculator on the HealthCare.gov website to determine your ALE status.

• Non-compliance with requirements

If a group does not follow CaliforniaChoice or the insurer’s guidelines for maintaining coverage, such as not providing required information, the insurer can deny renewal.

An insurer can also decline coverage if an employer does not select a replacement plan if the current policy is withdrawn and no longer available in the marketplace. The employer must be given the opportunity to purchase alternative coverage; however, there is no guarantee concerning costs.

Under the Health Insurance Portability and Accountability Act and the ACA, renewal denial by an insurer cannot be based on the health conditions of individuals within the group.

For further information about CaliforniaChoice Eligibility, Administrative Basics, Special Enrollment Periods, Group Change Guidelines, COBRA, Cal-COBRA, and Billing, refer to the Employer Administrative Guide.

Claim Denials

A denial for a claim under a Group Health Insurance plan is a separate issue athan a denial of an application for coverage, or a non-renewal of an employer-sponsored group plan.

A health claim may be denied by an insurer for a variety of reasons, including:

• Lack of prior authorization or required referral;
• Use of an out-of-network health care provider;
• An exclusion of the service (under the policy);
• Lack of medical necessity;
• Other reasons specifically related to the claim.

If you have (or one of your employees has) a claim denied, you have the right to:

1. Receive an explanation of your insurer’s appeal and grievance procedures;
2. File a complaint with your insurance company or plan administrator (you may be able to request an Independent Medical Review regarding your claim);
3. Receive an easy-to-understand written decision concerning your appeal;
4. File a complaint with the California Department of Insurance (CDOI) or the California Department of Managed Health Care if your insurer/administrator is based in California. The CDOI website includes information about what agency regulates different kinds of health policies.

If you disagree with the outcome of your appeal, you are typically able to request a reconsideration. A consumer assistance program or patient advocate may be able to assist. For employer-sponsored health insurance, your employee benefits or insurance broker may also be able to help with an appeal.

Get Your Questions Answered

Have more questions about coverage denial, non-renewal, or termination? Your employee benefits broker can answer your questions. For additional support, the CaliforniaChoice Customer Service team is just a call away at 800-558-8003.