Who is considered an employee for small group health insurance plans?

As a business owner, you need to know who is eligible to join your small business health insurance plan. There are many questions including how many hours are needed to qualify, can 1099 employees join a group plan, and can dependents be included on a plan. We trust the information below will help answer those questions.

Small Business Health Insurance Eligibility for Employees and Dependents

Small group health insurance plans cover employees and their eligible dependents. Employees who meet the below requirements can enroll.

A. Eligible employees who may enroll:

Active common law employees (defined as not an owner or an owner’s spouse) who work 20 or more hours per week are eligible for health benefits. Active common law employees include any individual employed by an employer. Temporary and seasonal employees are eligible at the option of the employer. This can also include a “1099 Employee” who is considered a common law employee per Department of Labor regulations and the Internal Revenue Code. Employers can also adjust the minimum hours required from as low as 20 hours to a maximum of 40 hours per week.

B. Valid Employer Class(es):

An employer may elect to offer coverage to a class of employees based on conditions pertaining to employment: geographic situs of employment, earnings, method of compensation, hours and occupational duties. Coverage may be limited to specific class(es) of employees if they are the only employees offered coverage. Employees who work less than 20 hours per week are not eligible employees and may not enroll in any small group health insurance plan. Example: Employer may elect to offer coverage only to employees who work at least 40 hours per week.

C. Eligible Dependents:

An employer may elect to offer coverage to dependents. Dependents cannot enroll for coverage unless the employee has enrolled. The following dependents may be enrolled on a small group product:

1. Spouses
2. Domestic Partners
3. Dependent Children until Age 26 (regardless of financial dependence, residency, student status, employment, marital status, or eligibility for other coverage) – Any policy which provides family coverage provides coverage for natural children, adopted children, unmarried disabled children, stepchildren, newborn children, children for who the employee has legal custody and are chiefly dependent on employee for support.
4. Additional Eligible Dependents
5. Foster children
6. Children for whom the insured is the legal guardian
7. Dependent Coverage Through Age 29 – Under NY Law, dependents (except for married dependents) may be covered through age 29 through two different options. Young Adult

Option (Cobra-like coverage elected by dependent)

1. Make-Available Rider (Purchased at the option of employer)

D. The following individuals are usually not eligible for small group medical coverage:

1. Employees of unrelated organizations
2. Seasonal employees
3. Temporary employees
4. Union employees unless required by union agreement
5. Owner Only groups (see section E below)

E. Groups that do not have any Common Law employees aka OWNER ONLY groups

New small group eligibility rules clarify that at least one common law employee must ENROLL into medical coverage in order to qualify for small group health insurance when the sole enrollee is the business owner. This aligns with the ERISA definition of employer sponsored group health insurance coverage and clarifies that a group may NOT consist of only a sole business owner. To qualify for group health insurance, there must be at least one enrolling employee who meets the common law employee definition under federal rules.

F. How can you become compliant when only an owner or owner’s spouse is enrolling on a group health plan?

This depends on how your company is incorporated, how employees and owners are paid, and which insurance company you are enrolled with.
For LLCs, S-Corps and C-Corps: groups with 2 or more Owners who are not married: This is a group with only owners and no W2 employees. These are OK with most carriers as long as all owners enroll, or the waiving owner(s) have qualifying other coverage so they meet participation requirements.
100% owner and W2 employee(s):These are NOT allowed unless W2 employee ENROLLS. Must have at least one common law employee enrolled for the sole owner to be eligible.
There might be some workarounds if you don’t otherwise qualify under the owner only guidelines above so call us to start the process of protecting your ability to enroll in or stay in the NY small business health insurance market.