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May a health plan define full-time as 40 hours a week?


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An employer maintains a health plan. For the plan's eligibility provisions, the plan defines a full-time employee as one who regularly works at least 40 hours a week. Being a full-time employee is among the plan's conditions for eligibility.

A consultant told the employer that it cannot maintain the 40-hours condition, and must change it to 30 hours. The employer replied that it is fully aware of the play-or-pay excise tax, and nonetheless prefers to maintain its 40-hours condition. The consultant continued to assert that the employer MUST change to 30 hours.

Apart from offering coverage so as not to attract a play-or-pay excise tax, is there some other law that constrains an employer's choice about which of its employees is eligible for its health plan?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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I am aware of no such Federal law. Probably a stretch, but could there be an insurance company/state insurance law requirement to offer coverage to all persons who work 30+ on the same terms and conditions?

Curious about your employer here. Is it comfortably less than 50 and therefore not subject to the employer mandate? If it is subject to the mandate, does the match really work out that it's better to pay the excise taxes?

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jpod, thank you for the help.

I told my inquirer (who is not the employer) that, if the health plan uses health insurance, a State's insurance law or even an insurer's contract terms could involve requirements or conditions about which employees form a group.

Also, I told my inquirer to invite the employer to reevaluate how carefully it had evaluated its liability for the play-or-pay excise tax. But the employer is not my client.

The employer has decided to manage its workforce so that a "line" employee is credited with no more than 28 hours in a week. But the employer seems to care about not providing health coverage to an office employee if he or she works more than 29 hours but less than 40 hours.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Is the natural impulse of insurance companies to push things into standardized boxes another reason for an employer that has 50 full-time-equivalent employees to abandon health insurance and go "self-funded"?

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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While it is not a healthcare reform issue, almost every state insurance law for small groups/employers has a statutory requirement that is less than 40 hours.

If this is a small employer who decides to go "self-funded", I suggest that they seek legal counsel because I think that both ERISA and FLSA have prohibitions that would seem to be violated by this distinction of "line" versus "office". ERISA 510 and FLSA 18C come to mind.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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Thanks for pointing out the VA statute referencing a 30 hour definition but I notice that it only applies to small group policies. There's at least 1 major VA carrier that is allowing small groups to set whatever eligibility requirements they want (including defining "full-time" at 40 hours).

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I only had on file the small group statutes. that does not mean that there is not a general statute applicable to larger groups. I just did not have it at hand.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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By the way, in case you had not noticed, small group in VA is now 100 lives.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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