Guidance Clarifies Calculation of Employees for Small Group Rating Purposes

On January 8, 2021, the Insurance Department issued Bulletin 2-2021 to provide guidance to insurers regarding the calculation of employees for small group health coverage rating purposes. The bulletin responded to carrier inquiries regarding: 1) whether the term “employee” is governed by federal or state law and 2) the applicable time period an employer should use to determine the employee count.

Federal law, including the ACA, generally defines a small employer in connection with a group health plan as an employer who employed an average of at least one but not more than 50 employees on business days during the preceding calendar year. However, a state may elect to define a small employer as one who employed up to 100 employees on average in the prior year. Additionally, the federal law definition includes any employees (e.g., full-time and part-time) in the count. Any contrary definition under state law is preempted (i.e., superseded) by the federal definition.

By contrast, the state’s group rating law defines a small employer as a business person or entity that, on at least 50% of its working days during the preceding year, employed no fewer than 2 or more than 25 eligible employees, the majority of whom were employed in the state.

The Insurance Department clarifies that the federal definition of employee should be used for group rating purposes. Accordingly, the conflicting state law would be preempted in this context. The bulletin notes that the state’s interpretation is also consistent with the analysis under Mississippi Insurance Department Bulletin 2016-9.

Employers that sponsor small group health plans should be aware of this bulletin.

Bulletin 2-2021 »