The State of New Jersey
NJ Department of Banking and Insurance
search  

 
Home > Insurance Division > Small Employer Health Insurance Program > SEH Buyer's Guide
Questions on Eligibility
NJ Small Employer Health Benefits Program Buyer's Guide
 
1. How does the two-part definition of Small Employer work?

An employer only needs to qualify under one of the two parts.  Because part one is a little more straight-forward than part two, we suggest that employers first consider part one of the definition.  This means we need to determine if the employees qualify as an eligible employee.  If the employer has at least one but not more than 50 eligible employees, the employer is a small employer and there is no need to even look at part two of the definition.  If an employer does not qualify under part one of the definition, check to see if the employer qualifies under part two of the definition which requires counting of employees using a specific formula. 

Because the two-part definition is new beginning in 2014 a couple of examples might help. 

Example A  “Mike’s Bike Shop” 


Mike is the owner and has one employee who works 27 hours per week, another employee who works 29 hours per week and a third who works 10 hours per week.  These employees worked for Mike’s Bike Shop on business days in the preceding calendar year and all earn at least the minimum wage.First we consider part one of the definition which means we need to determine if the employees qualify as eligible employees.  The employees working 27 and 29 hours per week satisfy the requirement of working 25 or more hours per week and they earn at least minimum wage.  These two employees are eligible employees.  The employee working 10 hours per week is not an eligible employee. 

Mike’s Bike Shop is a Small Employer using part one of the definition. 

Example B  “Sara’s Sandwich Shop” 

Sara and her husband Paul are the owners and they have 7 employees who work 20 hours per week.  These employees worked for Sara’s Sandwich Shop on business days in the preceding calendar year and all earn at least the minimum wage.

First we consider part one of the definition which means we need to determine if the employees qualify as eligible employees.  None of the employees work at least 25 hours per week therefore there are no eligible employees.  Sara’s Sandwich Shop is not a Small Employer using part one of the definition.  Next we consider part two of the definition which means we need to calculate the number of employees.  There are 7 employees working 20 hours per week (they are part-time employees) which means a total of 140 hours per week (20+20+20+20+20+20+20).  Next we multiply 140 by 4 and the product is 560.  Next divide 560 by 120.  The result is 4.66666 which we round down to the nearest whole number 4.  Using the employee calculation, Sara’s Sandwich Shop has 4 employees.

Sara’s Sandwich Shop is a Small Employer using part two of the definition. 
   
2. How is “eligible employee” determined?

When counting eligible employees, first identify all bona-fide employees who work a normal work week of 25 hours or more.  A bona-fide employee is an employee who is paid at least the minimum wage.  Each such employee counts as one.  From the total number of employees working 25 or more hours per week subtract the number of employees who work 25 or more hours per week on a temporary or substitute basis.  Also subtract any employees working 25 or more hours per week that belong to a labor union and are covered under the plan provided by the labor union.  If the result is at least one but not more than 50, the employer is a small employer under part one of the definition of small employer. 

An example might help.

“Plumbing Plus” is owned by Paul, Ralph and Mark who have six full-time plumbers and three office staff.  The nine employees working for Plumbing Plus are paid at least minimum wage and work 30 hours per week.  There are nine employees working 25 or more hours per week.

One member of the office staff is a temporary employee brought in to do year end accounting for two months. 
The six plumbers belong to the Plumber’s Union and get health benefits from the labor union. 

9 employees – 1 temporary employee – 6 union employees = 2 eligible employees
   
3. If some of my employees work outside of New Jersey does that change the way eligible employee is determined and whether I am a small employer that can buy coverage under the SEH Program?

Where your employees live and work would not affect whether or not the business is a small employer.  There is no difference in determining who is and is not an eligible employee based on an employees’ work location(s).  However, where they live or work may mean they are outside the service area meaning they could not be covered under your small employer plan.  Remember that eligible employees and dependents can only be covered if they live, work or reside in the service area of the plan.

An example might help.

“Craig’s Computers” is located in New Jersey.  Craig, the owner, works at the New Jersey store.  Craig has five employees who work from their homes in Pennsylvania and Delaware.  They each work 40 hours per week and each are paid well above the minimum wage. 

Is Craig’s Computers a small employer?  Yes since Craig employs 5 eligible employees.  If Craig applies for a small employer plan can those eligible employees be covered under the small employer plan?  It depends.  If Craig shops carefully to find a plan that includes Pennsylvania and Delaware in the service area then the employees working in Pennsylvania and Delaware would be eligible to be covered under the plan Craig buys.  If Craig buys a small employer plan with a service area of New Jersey, the employees would not be eligible to be covered.
   
4. Does the Service Area have to be the whole state of New Jersey?

Although it is common for carriers to offer plans where the service area is the entire state of New Jersey, carriers may offer plans where the service area is limited to specified counties within New Jersey.  It is also possible that carriers may offer plans where the service area is broader than the state of New Jersey.  Ask the carrier to define the service area for the plan you are considering. 
   
5. How is "temporary" or seasonal employee defined?

The SEH Program Act does not define what constitutes “temporary” or seasonal, and the SEH Board has not defined the terms by regulation.  Carriers establish criteria for who is considered a temporary or seasonal employee, and so the standards may differ slightly from one carrier to another.  An employer or a broker should consult with a carrier on this issue.   
   
6. If I own multiple businesses, do I count my employees for all businesses together, or separately?

Whenever there are affiliated businesses, the first determination that must be made is whether the businesses are treated as a single employer under subsections (b), (c), (m) or (o) of section 414 of the Internal Revenue Code of 1986 (26 U.S.C. §414).  The employer will need to obtain a statement from a tax accountant or a tax attorney specifying whether or not the affiliated companies are a single employer for tax purposes.  If the affiliated companies are considered a single employer under the federal tax code, then the combined employment base is considered in the analysis of whether the affiliated companies are a small employer.  If the affiliated companies are considered to be separate employers under the federal tax code, then the analysis of whether a small employer exists is performed separately for each company. 
   
7. Does the law require that I provide health benefits for my employees?

No, the law does not require any employer to provide coverage to employees. However, if you provide small group health coverage, you must comply with the requirements of the law.
   
8. May a self-employed husband and wife with no other people working in the business obtain group coverage under the small employer health benefits program?

No, a business with only husband and wife does not qualify under the new federal law requirements. 
   
9. May a self-employed husband and wife with a full-time employee working in the business obtain group coverage under the small employer health benefits program?  If yes, who can be covered?

If the full-time employee is an eligible employee the business would qualify as a small employer under part one of the small employer definition and could buy small employer coverage assuming the employer satisfies the participation and contribution requirements.  In that case, the husband, the wife and the employee are eligible to be covered.
   
10. What if my business didn't have employees in the previous calendar year?

If the business is in its first year of operation, and so had no employees in the prior calendar year, the employer does not have to wait a whole year to purchase coverage.  Instead, the number of eligible employees will be based on the average number of eligible employees the business is reasonably expected to employ on business days in the current calendar year and the employer must have at least one eligible employee on the effective date of coverage.

If the business is not in its first year of operation, but is just now hiring one or more additional eligible employees, then the carrier will consider the prior calendar year employment average.  Such a business will not meet the definition of a small employer unless there was at least one employee on business days in the preceding calendar year.   
   
11. If I decide to offer coverage, must I offer it to all employees?

No. You may elect to offer coverage to one class of employee and not another class.  However, distinctions in classes of employees must be based on bona fide conditions pertaining to employment, such as job title, length of service, hours worked, salary, etc.  Even if you decide to offer coverage to a class of employees, you still must meet the small group participation requirements based on the total number of eligible employees, not just the class of employees to which you offer coverage.
   
12. May a small employer provide coverage to independent contractors?

No, they are not employees.  They may choose to pursue individual coverage.
   
13. May a small employer voluntarily elect to provide coverage to employees who work fewer than 25 hours per week?

No, they are not eligible employees.  They may choose to pursue individual coverage.
   
14. If I offer my employees a health benefits plan, may I impose a waiting period before they can enroll?

Yes, you have the option of requiring a service waiting period of no more than 90 days.
   
15. May I impose a waiting period that is different for some employees?

Yes, although no waiting period can exceed 90 days, and the differing treatment of employees must be based on class distinctions established on bona fide conditions of employment, such as hours worked, salary, title, etc.
   
16. May a carrier require that a certain number of my employees “participate” if I offer a health benefits plan?

Carriers are permitted to impose a participation requirement.  However, the SEH Program Act does not permit carriers to require more than a 75% participation requirement.  In addition, carriers are required by law to credit towards the 75% participation requirement all eligible employees that have certain other health coverage:  Medicare, Medicaid or NJ FamilyCare, coverage as an employee through another employer’s group health plan, or coverage under any group health plan as a dependent and Tricare.  Carriers are not required to count the employer’s employees covered under another carrier’s policy offered by the employer.  Note that even if an employer pays 100% of the cost of coverage, a carrier cannot require greater than 75% participation. 

Remember that the 75% participation requirement is waived during the Employer Open Enrollment Period. 
   
17. If I offer my employees coverage, do I have to contribute to the premium?

You must contribute at least 10% of the total group’s premium; of course, you can choose to contribute up to 100%.  You are not required to contribute a specific percentage of each employee’s premium, but can choose to vary contributions by class of employee, so long as your total contribution is 10% of the group’s premium.  Distinctions in classes of employees must be based on conditions pertaining to employment, such as job title, length of service, or salary.

Note that the 10% contribution requirement is waived during the Employer Open Enrollment Period.
   
18. If I offer coverage to my employees, do I have to permit coverage of dependents?

No.  But if you permit one employee within a class to cover dependents, then you must permit all employees within that class to cover dependents.  Distinctions in classes of employees must be based on bona fide conditions pertaining to employment, such as job title, length of service, salary, etc.
   
19. If I permit my employees to cover dependents, do I have to contribute to the premium for dependents?

No.  While you are required to contribute 10% of the total premium for your covered employees, you do not necessarily have to contribute to the premium related to dependent coverage.  Because the dependent premium is part of the total premium, if you contribute nothing towards dependent coverage, you’ll need to contribute more than 10% of the employee cost in order to satisfy the requirement to contribute at least 10% of the total premium.  Of course, if you elect to contribute to the dependent premium, you may choose to contribute any amount you wish, by class of employee.
   
20. If I contribute to a health savings account for my employees, does that amount count towards the required contribution for the health benefits plan?

No.
   
21. May I change my contribution levels?

Yes.  However, you may not contribute less than 10% of the group premium.  Further, the change can only be made if the current plan has been in force at least 12 months.  Pursuant to federal law, if you elect to change your contribution levels, the change creates a special enrollment period for your employees.  This allows employees who may have previously declined coverage to enroll, and allows enrolled employees to terminate their enrollment or to change to an alternate coverage option if your group has more than one option available.
   
22. Does my group have to continue to meet eligibility requirements?

Yes, on an annual basis.  Once a year – several months prior to the anniversary date of your policy – you will have to complete an employer certification regarding your group’s census, and verify that contribution and participation requirements continue to be met.
   
23. What happens to my group’s coverage if the number of my eligible employees eventually exceeds 50?

If your business grows to more than 50 eligible employees, you may become ineligible to purchase or amend small employer coverage, but not right away, because eligibility is based on average employment activity in the prior calendar year.  So, even if you have 55 eligible employees today, the carrier will look at the number of eligible employees you had during the prior calendar year.

Once the number of eligible employees during the prior calendar year exceeds 50, an employer is no longer a small employer.  If such an employer wishes to remain covered under the plan(s) purchased while the employer was a small employer, the employer may renew the previously purchased small employer plan(s) without any changes.  However, the rates charged may no longer be the carrier’s SEH market rates.  The carrier will refuse any application to make a change to the plan(s) in any way, no matter how minor, because the employer completing the application is no longer a small employer.  Instead, the employer may apply for plans the carrier makes available to large employers.
   
24. What happens to my group’s coverage if the number of my eligible employees eventually falls below one?

Annually upon renewal
, you must show that you have at least one eligible employee or your SEH policy will be non-renewed.  If less than one employee remains (for example, only the owner remains), coverage may be obtained in the individual market. 
 
Previous page
Next page
 
OPRA
OPRA is a state law that was enacted to give the public greater access to government records maintained by public agencies in New Jersey.
line
Adobe Acrobat
You will need to download the latest version of Adobe Acrobat Reader in order to correctly view and print PDF (Portable Document Format) files from this web site.
state seal
Copyright © 2011, State of New Jersey
New Jersey Department of Banking and Insurance