The Affordable Care Act (ACA) has transformed the landscape of health insurance, making it simpler for people to secure the coverage they desire. Yet, navigating the ACA can still present challenges, with the possibility of policies being declined or denied. Below, we’ve spotlighted six key scenarios you’ll want to watch out for.
1: The employer’s contribution falls short of the insurer’s requirements
If you’re new to Group Health Insurance, you might not know that insurers usually require employers to pay at least 50% of the cost for a plan or benefit. If the employer pays less than 50%, the application for coverage will be turned down, making the group ineligible for employer-sponsored, ACA-compliant coverage.
2: The group’s participation level doesn’t meet the insurer’s standard
In many states, including California, health insurance carriers can decline to issue a Group Health policy if fewer than 50-75% of employees choose to enroll. Some carriers and administrators have even stricter participation requirements.
You might expect that if you’re paying half or more of the premium for health insurance, your employees would be quick to sign up for your Group Health plan. Yet, even when employers offer a good share of the insurance cost, they sometimes find that younger and lower-income employees decline the coverage. This can lower your group’s participation rate and could lead to a drop in overall coverage uptake.
Possible Exception: The ACA requires health insurers to offer an annual one-month Special Open Enrollment Window (SOEW). It allows eligible Small Group employers to purchase Medical coverage without having to meet standard employer-contribution and/or employee-participation ratios.
The SOEW takes place from November 15 through December 15 each year. It gives eligible Small Group employers a chance to enroll for coverage effective January 1 of the following year. That means eligible employers and employees who enroll this year, from November 15 to December 15, 2024, can get coverage effective January 1, 2025.
Small Group carriers have specific timeframes and important rules that employers and brokers need to know about regarding new business submissions during the SEOW. Ask your broker about plans and/or programs that may be available during SOEW if you have been unable to meet prior contribution or participation requirements established by insurers serving your area.
What are other reasons an employer or employee may be declined Group Health coverage?
3: Employment status
Typically, an employee is only eligible for Group Health coverage if the employee is working full-time. If an employee’s job is cut to part-time, or if they’ve always worked part-time, their coverage can be denied or even canceled going back to when their employment status changed to less than full-time.
4: Failure to pay premium
If a group’s premium is not paid by the due date, coverage can be denied or can end retroactive to the last paid premium date.
5: Other coverage
Employees could be declined ACA-compliant health insurance under an employer-sponsored plan if they have individual or family coverage through a state exchange (such as Covered California). That outside coverage could also subject an Applicable Larger Employer (ALE) to ACA penalties if the employer falls under the ACA employer mandate (also known as the employer-shared responsibility penalties). More information is available on the Internal Revenue Service website.
6: Fraud
If an employer or applicant (either an employee or a dependent) commits fraud or misrepresents important facts about getting or keeping a health policy, the insurance company can refuse to renew it.
7: Non-compliance with requirements
If a group does not follow the insurer’s guidelines for maintaining coverage, such as not providing required information, the insurer can deny renewal.
An insurer can also decline coverage if an employer does not select a replacement plan if the current policy is withdrawn and no longer available in the marketplace. The insurer needs to offer the affected group a chance to buy different coverage, but there’s no guarantee that the cost will be similar.
Under the Health Insurance Portability and Accountability Act and the ACA, renewal denial by the insurer cannot be based on the health conditions of individuals within the group.
Claim Denials
Denying a claim in Group Health Insurance is different from rejecting an application for coverage or not renewing an employer-sponsored group plan.
A health claim may be denied by an insurer for a variety of reasons, including:
- Lack of prior authorization or required referral;
- Use of an out-of-network health care provider;
- An exclusion of the service (under the policy);
- Lack of medical necessity;
- Other reasons specifically related to the claim.
If you have (or one of your employees has) a claim denied, you have the right to:
a. Receive an explanation of your insurer’s appeal and grievance procedures;
b. File a complaint with your insurance company or plan administrator (you may be able to request an Independent Medical Review regarding your claim);
c. Receive an easy-to-understand written decision concerning your appeal;
d. File a complaint with the California Department of Insurance (CDOI) or the California Department of Managed Health Care if your insurer/administrator is based in California. The CDOI website includes information about what agency regulates different kinds of health policies.
If you’re not happy with your appeal’s outcome, you can usually ask for a second look. Consider getting help from a consumer assistance program or a patient advocate. If your health insurance comes from your job, your employee benefits department or insurance broker might also help with the appeal process.
More Reasons for Coverage Denial
Your employee benefits broker or insurance agent can give you more details on why coverage might be denied. They can also explain how to appeal a claim with your current insurer or a new one you’re considering, including the SOEW process.
If you don’t have a broker, we make it easy to search for one.
