12 Mar The Ins and Outs of Mandatory Automatic Enrollment in Health Plans
The following blog appeared in the March 12 , 2012 edition of The NY Report (http://www.nyreport.com/articles/82785/the_ins_and_outs_of_mandatory_automatic_enrollment_in_health_plans)…
Since the passage of the Patient Protection and Affordable Care Act (PPACA), U.S. employers—specifically companies with 200 or more full-time employees covered under the Fair Labor Standards Act (FLSA)—have felt its effects, with an average of two percent increase in enrollment.
One of the more significant issues at hand is that employers sponsoring one or more health plans and employing 200 or more full-time employees (defined as employees working, on average, 30 hours per week) are required to establish an automatic enrollment program for their group health plans. This automatic enrollment program is to be used to enroll new full-time employees and re-enroll current employees.
Of all the employer-related reform provisions included in the PPACA, auto-enrollment seems to be causing the most headaches. Implementation creates novel administrative challenges for employers. To start with, there is a disclosure notice requirement to be distributed to all employees at the time of hiring (or no later than March 1, 2013 for current employees), informing them of their automatic enrollment in the plan and their ability to opt out of any coverage in which the individual or employee was automatically enrolled.
Further, the notice should include, but is not limited to, information on who is covered, how it works, the consequences of not making an affirmative election, and any rights employees have to make changes once they have been automatically enrolled in a plan. The Department of Labor (DOL) is still expected to issue detailed guidance on these and other requirements.
The law does not yet contain an express effective date; we must wait until the DOL issues implementing regulations, which the DOL intends to complete by 2014. Fortunately, automatic enrollment does not apply to all grandfathered health plans.
With this being said, one key consequence of the automatic enrollment mandate for new full-time employees who do not affirmatively opt-out of coverage will likely lead to some employees being enrolled even though they do not want or need the coverage. However, it appears from the mandate that these employees will have the right to opt-out retroactively, although it is not clear whether employees will be permitted to drop coverage altogether, or switch from the employer’s default coverage to other plan options.
Employers are already considering how to manage the cost of the auto-enrollment requirement. Those that currently offer only one medical plan may simply use their current plan as the default plan for auto-enrolling new full-time employees. However, others may add a new, lower-cost plan to use as the default plan, while others may consider changing to a new, lower-cost plan for all employees.
With the amount of vagueness around the essential details of the automatic enrollment mandate, we advise employers to wait until the DOL issues more guidance before implementing a new automatic enrollment program or modifying an existing one.