Guest Spotlight

Guest Spotlight: Small Employer Groups Redefined and New Rules to Determine Group Size for Employer Sponsored Health Insurance

17 Jun 2015

As of January 1, 2016 healthcare reform redefines a small employer as one with 100 or fewer full-time equivalent employees.  As a result employers with 51-100 FTE employees, many of which are currently classified as large groups, will be defined as small employers at the start of their plan year in 2016.  This may have a significant impact on benefit and carrier availability and premiums since they will be restricted to the Community Rated market.

In addition, New York is changing the employee group size counting methodology used for new and renewing business effective on or after January 1, 2016. New York currently uses the number of eligible employees to count group size. As of January 1, 2016, New York will use a full-time equivalent (FTE) methodology. This change could impact which market segment your employer sponsored group health plan will fall into for rating and product availability purposes.

This new rule can impact any employer but those with Union employees, Employees outside the local service area and a large number of variable hour employees should pay special attention.

Under the current methodology an employee would not count employees that were not eligible for the plan such as:

  • Union employees
  • Employees in an ineligible class
  • Employees in an ineligible area (out-of-state)
  • Employees working for entities under common control under a single employer

Under the new methodology these classes of employees will be counted to determine group size. Therefore, the new method could result in many small employers being reclassified as large groups.

Please use the information below as a guideline to derive the correct FTE group size calculation for 2016. Based on the FTE total, your employer sponsored group health plan may or may not be impacted by the upcoming small group definition change. Employers with 1-100 FTE’s will be required to purchase a small group product in 2016. Employers with 101 or more FTE’s will continue on their large group policies in 2016.

An excel-based calculator is available to help you calculate FTE. Please contact us for assistance.

For purposes of determining the number of full-time equivalent employee count: The number of employees means the average number of employees employed full-time (at least 30 hours/week in any given month), by the company on business days during the preceding calendar year.  Union and Non-Union, Waivers, Excluded Classes, Covered by another carrier all must be counted.

In addition to the number of full-time employees noted above, for any month otherwise determined, include for such month the number of full-time employees divided by the aggregate number of hours of service of all employees who are not full-time employees for the month by 120.

Employers should exclude employees who were seasonal workers who worked 120 days or fewer in the preceding calendar year.

We will continue to monitor this for updates.

 Louis C. Bernardi