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Participation and Contribution Requirements
NJ Small Employer Health Benefits Program Buyer's Guide
Participation Requirement

At least 75 percent of the eligible employees must be covered under the small employer health benefits plan the employer is offering or covered under one of the following:
  1. any fully insured health benefits plan offered by the small employer;
  2. Medicare;
  3. Medicaid or NJ FamilyCare;
  4. another group health benefits plan;
  5. a spouse's group health benefits plan; or
  6. Tricare.

Note that coverage under an individual health benefits plan does not count toward satisfaction of the 75% participation requirement.

A carrier is not required to give participation credit for those eligible employees who are covered under another carrier’s contract issued to the same employer. 

A carrier must offer at least one policy to a small employer’s group if the employer meets the participation requirements.  A carrier may permit a small employer to offer more than one of the carrier’s small group health benefits policies to employees; however, the carrier may limit the number of additional policies it will issue, based on the carrier’s “underwriting guidelines” available on the SEH Board’s website.  If a carrier has not provided underwriting guidelines to the SEH Board for posting, then the carrier does not limit the number of policies it will issue to a small employer’s group.

Group Health Plan

A “group health plan” means an employee welfare benefit plan, as defined in Title I of section 3 of Pub.L.93-406, the “Employee Retirement Income Security Act of 1974” (29 U.S.C.s.1002(1)), to the extent that the plan provides medical care, including items and services paid for as medical care to employees or their dependents directly or through insurance, reimbursement or otherwise.  Most plans offered by employers are considered group health plans, including small employer health benefits plans.  However, for purposes of calculating participation, the term group health plan does not include the self-funded plans offered by the same employer, and is not required to include employees covered under policies issued by another carrier to the same employer (see the carrier’s “underwriting guidelines”, if any, available on the SEH Board’s website).

Classes of Employees and Participation

An employer is permitted to limit the offer of coverage to employees by class, subject to some limitations.   Classes must be based on bona fide conditions of employment – for instance, hours worked per week, salary versus hourly wage, or union versus non-union.*  But for purposes of meeting the participation requirement, all eligible employees are considered in the count.  For example, if an employer with 30 eligible employees – 15 of whom work 35 hours per week and 15 of whom work 30 hours per week – wants to offer coverage only to employees working 35 hours per week, the employer may do so, but the group must meet the participation requirement based on 30 eligible employees.  Thus, at least 23 employees must be covered under the employer’s group health plans(s) or another group health plan, Medicare, Medicaid or NJFamilyCare or Tricare for the employer to meet the participation requirement.

*Please note: Beginning in 2011, federal law makes most group health plans that unfairly discriminate in favor of highly compensated employees subject to tax and other potential penalties.  However, the Internal Revenue Service has stated in Notice 2011-1 that it will not require employers to comply with the requirement until the agency has adopted regulations regarding nondiscrimination in favor of highly compensated individuals.  As of January 2014 such regulations have not yet been adopted.

Changes in a Carrier's Underwriting Guidelines

A carrier may change its underwriting guidelines.  Any revisions will be posted on the SEH Board’s website, and will apply only to new business or renewals with plan changes occurring on or after the date the revisions to the guidelines are effective.
Exception to the 75% Participation Requirement

The 75% participation requirement does not apply to applications received during the Employer Open Enrollment Period which takes place from November 15 through December 15 each year. 
Contribution Requirement

A small employer is required to pay 10 percent of the total cost of a health benefits plan issued to the employer’s group. A small employer may, of course, elect to pay a greater percentage – up to 100 percent – but a carrier may not require the employer to pay more than 10 percent as a condition of issuing the small employer a small group health benefits plan.

Note that the employer’s contribution obligation is based on the total cost of the health benefits plan, not just the cost related to employees or a class of employees.  For example, if the total cost of a plan for all employees and dependents is $10,000 per year, the minimum employer contribution would be $1,000 per year.

For purposes of insurance law, it is possible for an employer to limit its contributions to the group premium by class of employee or by employee coverage only (thus, requiring some classes of employees to pay more of the premium than other classes, or requiring employees to pay the full cost of dependent coverage, if offered).  However, the employer’s contribution obligation remains at least 10 percent of the total cost for the health benefits plan.     
Exception to the 10% Contribution Requirement

The 10% contribution requirement does not apply to applications received during the Employer Open Enrollment Period which takes place from November 15 through December 15 each year. 

Remember that New Jersey law defines an individual health benefits plan as including a certificate where the eligible person pays the premium.  In order for the coverage to be considered group coverage the employer will need to contribute some amount toward the group premium.
Service Area

Since carriers selling network based small employer plans are not required to cover an employee that does not live, work, or reside in the small employer carrier's service area it is important for small employers to check whether the service area meets the needs of the eligible employees and their dependents. 

This means if a New Jersey small employer has a location in another state and several of the eligible employees work at that location and live in the state of that location, those employees and their dependents can be covered under the small employer group plan provided that other state is inside the carrier’s service area.  If the other location is outside the carrier’s service area employees and dependents in that location cannot be covered under the small employer plan.
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