ERISA fully insured health plan - Payment of monthly premium to insurance company prior to receipt of employee contribution or self-pay

[Guest nicoletrail]

Does anyone know if it is legal for an ERISA governed, tax-qualified, multiemployer, fully insured health plan to go ahead and send the monthly premium to the insurance company even though self-pay amounts for retirees and other self-payors are not due until a later date? Would such a practice be considered a prohibited transaction? Our plan is switching from self-insured to fully-insured. Under the self-insured plan, in order to get coverage for January 2005, a retiree or other self-payor (unemployed participants for example) are not required to pay the self-pay amount until 2/15/05. Therefore, coverage is actually given even though the contribution for that month of coverage is not collected until the next month.

Now that we are going fully insured, the insurance company requires the monthly premium to be paid by the first day of the month in which coverage is provided. In other words, the self-payors would have to pay their contribution by Jan. 1 (instead of 2/15) in order to get coverage. The plan has enough money to go ahead and pay the premium for everyone. Can it do this based on the assumption that they will receive the self-pay amount from the self-payors at later date?

This would only be necessary for the first few months because the plan is going to be amended to require payment at the same time the premium is due.

[GBurns]

In most employer sponsored plans the insurance premium is advanced by the company before the deductions from the employees and retiree payments.

All insurance coverage has premiums due before the coverage even your car insurance.

All in force insurance has a grace period so I do not see what your amendment will change for the self payors.

[mal]

Nicole,

Check with your carrier on the right to retroactively

terminate. A couple of our fully insured multiemployer

HW plans have this problem with nonbargained participants.

(Coverage is extended before premium is received.) However,

the carrier allows the Plan the right to retroactively terminate

these folks if the money is not received. In other words, they

receive coverage contingent upon payment. If they don't pay,

the carrier seeks reimbursement for any bills paid during the

applicable period of time...from the provider. The provider

then pursues the participant directly.