Employee Eligibility

Your plan will have established criteria for determining whether and when an employee is eligible to participate in the group health plan.

In addition to the established criteria, an employer must also consider various non-discrimination requirements when determining an employee’s eligibility.

Employers have the freedom to create various rules and/or criteria for employee eligibility in a group health plan, such as service or other requirements. However, these criteria are still subject to laws that prohibit discrimination and ensure plan portability.

In addition, applicable large employers subject to the Employer Shared Responsibility provisions (Play or Pay) under the ACA must provide coverage to full-time employees and their dependents.

Please note that the eligibility provisions for fully insured plans will be dictated in large part by the insurer.

You should check your Summary Plan Description (plan description for non-ERISA plans) for rules and criteria such as:

• Full-time employment status, e.g., working more than 30 hours a week.

Always verify that the definitions for full-time, part-time and temporary workers are consistent between all employment related documents, such as your employee handbook, offer letters and your SPD or other plan documents.

• Waiting period

A group health plan may not use a waiting period that exceeds 90 calendar days (see IRS Notice 2012-58). A waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective. Being eligible for coverage means having met the plan’s eligibility conditions (such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms). See the Geek Out! Waiting Period page for more information.

An employer cannot discriminate against individuals when determining eligibility. See the Geek Out! HIPAA Nondiscrimination page and Geek Out! Other Nondiscrimination Acts page for more information. In general, an employer must:

• Apply eligibility rules equally to all employees
• Allow all eligible employees to participate in the plan
• Charge each eligible employee the same for selected coverages
• Not discriminate against individuals in determining eligibility for benefits or in determining individual premium or contribution rates based on health factors
• Not discriminate in favor of highly compensated individuals as defined under Section 105(h) of the Internal Revenue Code with respect to eligibility to participate or benefits received under the plan

Under certain circumstances, employers can charge employees different premiums based on the attainment of certain health standards, pursuant to a standard-based wellness program that is designed in compliance with HIPAA regulations.

NOTE: On April 20, 2015, the Equal Employment Opportunities Commission (“EEOC”) published a proposed rule providing guidance on what employer-sponsored wellness programs must do to comply with the ADA. 

Nondiscrimination

HIPAA Nondiscrimination Provisions

The employer cannot discriminate against individuals in eligibility for benefits and in individual premium or contribution rates based on health factors.

Health factors include:

• health status
• medical condition (including both physical and mental illness)
• claims experience
• receipt of health care
• medical history
• genetic information
• evidence of insurability
• disability

Nondiscrimination rules prohibit discrimination within a group of similarly situated individuals.

In other words, employers can charge different premiums or offer different coverage for full-time vs. part-time employees, or exempt vs. non-exempt employees, as long as the differences are determined based on a legitimate employment-based classification.  But, employers cannot differentiate among employees within the same class, e.g., all exempt employees must be charged the same premium and offered the same coverage.

Additional nondiscrimination rules include a prohibition against:

• non-confinement clauses
• actively-at-work clauses
• source-of-injury exclusions

See HIPAA Nondiscrimination for more information.

Nondiscrimination & Wellness

Nondiscrimination & Wellness Programs

Wellness Related Nondiscrimination Rules

Group health plans may discriminate by charging a different premium based on health factors through Wellness programs, if such are established and maintained appropriately under the following regulations.

• All employer-sponsored health promotion and disease prevention programs are considered to be Wellness Programs, and must be designed in compliance with HIPAA if the program is tied to the employer’s health plan.

Wellness Programs can be categorized into two types:

No Reward or Health Standard (“Participation Only Programs”):
Open to all similarly-situated individuals or employees, but does not offer a reward (such as a premium reduction), or if it does offer a reward, does not require participants to meet any health standard in order to receive the reward.

These programs are deemed to comply with the HIPAA nondiscrimination rules.

Reward Based on Health Standard (“Standard Based Programs”):
Conditions obtaining a reward on the satisfaction of a standard related to a health factor.  This may be a discount or rebate of premium, waiver of all or part of cost sharing mechanism (deductible, co-payment or co-insurance), absence of a surcharge or the value of a benefit that would otherwise not be provided under the group health plan.

These programs must meet the following five requirements to satisfy HIPAA nondiscrimination rules.

1.  Limited Reward: If the reward is tied to a group health plan, the total reward for meeting the wellness standard, combined with any other rewards for health factor based programs under the same plan, cannot exceed 20 percent of the full cost of coverage under that health plan.  Full cost of coverage includes the total cost of the employer and employee contribution.  It will also include the total cost of family coverage if dependents are allowed to participate in the program.

2.  Reasonable Design: Must be reasonably designed to promote health or prevent disease.

3.  Annual Opportunity to Qualify: Must give eligible participants an opportunity to qualify for the reward at least once a year.

4.  Uniform Availability:  Must be available to all similarly situated employees and allow a reasonable standard (or waive the applicable standard) for participants who would have an unreasonable difficulty or be medically inadvisable to meet the standard. Employers may ask for verification of this, such as a physician’s statement.

5.  Disclosure of Reasonable Alternatives: Plan materials describing the health standard and reward must also disclose that a reasonable alternative standard is available to participants for whom it is unreasonably difficult or medically inadvisable to meet the standard required to earn the reward.

Additional Resources

Click Here for a link to Wellness Nondiscrimination Rules.