Oregon Small Employer Medical Plans

Oregon small employer medical plans

Oregon regulates its small employer health insurance market in its own statutes, ORS chapter 743B. These rules sit on top of the federal group health rules you have already studied — they do not replace HIPAA or the Affordable Care Act, they add Oregon requirements that any carrier doing business in this state must also meet.

Purpose of group insurance (ORS 743B.003)

Oregon states why these rules exist, and the list is a useful map of what follows. The purposes are to promote the availability of coverage to groups regardless of enrollees’ health status or claims experience, to prevent abusive rating practices, to require disclosure of rating practices, to prohibit preexisting condition exclusions, to encourage the availability of individual plans, to improve renewability and continuity of coverage, to improve the efficiency and fairness of the market, and to ensure Oregon coverage satisfies HIPAA and the Affordable Care Act with enforcement retained by the Director of the Department of Consumer and Business Services.

Definition of small employer (ORS 743B.005)

Under Oregon law a small employer is an employer that:

• Employed an average of at least one but not more than 50 full-time equivalent employees on business days during the preceding calendar year, and
• Employs at least one full-time equivalent employee on the first day of the plan year

The Department of Consumer and Business Services prescribes the counting method by rule, and that method must be consistent with the federal requirements for the Small Business Health Options Program (ORS 743B.020).

Watch this number. You may have learned a small group as “2 to 50” — that was the older federal formulation and it is not Oregon’s definition. In Oregon a business with a single employee can be a small employer.

Two related definitions from the same section do work throughout this material. An eligible employee is an employee who is eligible for coverage under a group health benefit plan. A late enrollee is someone who enrolls after the initial enrollment period during which they were eligible but declined — subject to a list of exceptions, including qualifying for a special enrollment period, applying during open enrollment, a court order to cover a spouse or minor child where enrollment is requested within 30 days, and involuntary termination of Medicaid, Medicare, TRICARE or Indian Health Service coverage within 63 days before applying.

Requirements of small employer health benefit plans (ORS 743B.013)

Oregon collects the substantive requirements for this market into one section. A small employer health benefit plan:

• Must cover essential health benefits, unless it is a grandfathered plan
• May require an affiliation period of no more than two months for an enrollee, or 90 days for a late enrollee
• May not apply a preexisting condition exclusion to any enrollee
• May subject a late enrollee to a group eligibility waiting period of no more than 90 days
• May not impose annual or lifetime dollar limits on essential health benefits
• Must contain special enrollment periods as provided by federal law and department rule

Renewability, participation and rating each get their own treatment below, because each is a separate line on the Oregon exam outline.

Sidenote

Know this...

You may see the state’s exam outline cite “Requirements of small employer” to ORS 742.360. Don’t go looking there — that section is titled “Release of surety on bond of public official by action of surety” and has nothing to do with health insurance. Oregon’s small employer requirements were renumbered out of the old ORS 743.730 to 743.737 series into ORS chapter 743B in 2015, and they now sit in ORS 743B.013.

Issuance of group contract (ORS 743B.010)

Where an affiliated group of employers is treated as a single employer under section 414(b), ©, (m) or (o) of the Internal Revenue Code, a carrier may issue one group health benefit plan to the whole affiliated group, counting the employees of the affiliated group, if the group requests that coverage.

Once a plan has been issued to a small employer outside the exchange, the carrier must determine the employer’s number of employees annually to decide whether it is still eligible as a small employer.

Oregon’s small employer rules then continue to apply until the plan anniversary date following the date the employer stops meeting the definition. An employer that grows past 50 mid-year does not lose the protections in the middle of a plan year.

Provisions of coverage (ORS 743B.011)

Oregon’s small employer rules attach to a health benefit plan that covers one or more employees of a small employer when either of these is true:

• Any portion of the premium or benefits is paid by the small employer, or any employee is reimbursed by the small employer — through a wage adjustment or otherwise — for any portion of the premium
• The plan is treated by the employer or the employees as part of a program under section 106, 125 or 162 of the Internal Revenue Code

Two arrangements are carved out: an individual plan whose premium is partly reimbursed through a qualified small employer health reimbursement arrangement (QSEHRA), and an individual plan integrated with a health reimbursement arrangement or other account-based group plan authorized by federal law.

Within a plan that is covered, three duties follow:

• A carrier may provide different plans to different categories of employees, but only where the employer’s categories are bona fide employment-based classifications consistent with its usual business practice and unrelated to the actual or expected health status of the employees or their dependents
• A carrier that offers coverage to a small employer must offer coverage to all eligible employees, and if the employer elects to offer dependent coverage, to all dependents of eligible employees
• An insurer may not deny, delay or terminate an individual’s participation in a group health benefit plan, or exclude coverage otherwise provided, based on a preexisting condition

Basic coverage (ORS 743B.005, ORS 743B.012)

A health benefit plan in Oregon means a hospital expense, medical expense or hospital-or-medical expense policy or certificate, a health care service contractor’s subscriber contract, or a plan provided by a multiple employer welfare arrangement to the extent it is subject to state regulation.

Oregon deliberately excludes a long list of products from that definition — among them accident-only, specific disease, credit or disability income coverage, Medicare supplement policies, separately offered long-term care insurance, hospital-only or other fixed indemnity insurance, short term health insurance, dental-only and vision-only coverage, and coverage arising out of workers’ compensation. Those products are regulated, but they are not “health benefit plans” for the purposes of the small employer rules.

The basic coverage a small employer plan must provide is essential health benefits, consistent with federal law, unless the plan is grandfathered (ORS 743B.013(1)(a)).

Availability of coverage (ORS 743B.012)

Oregon’s guaranteed availability rule for the small employer market has two halves, and both are conditions of transacting business here:

• As a condition of doing business in the small employer market, a carrier must offer small employers all of its health benefit plans that the department has approved for that market and for which the employer is eligible
• A carrier must issue any plan it offers to a small employer that applies for it, agrees to make the required premium payments, and satisfies the plan’s other provisions

A carrier must also actively market all the plans it offers small employers in the geographic areas where it makes coverage available.

A carrier is not required to offer coverage where:

• The small employer is not physically located in the carrier’s approved service area
• The employee neither works nor resides within the carrier’s approved service areas
• The carrier reasonably anticipates, and demonstrates to the department, that it lacks provider-network capacity to serve those small groups adequately

A carrier that declines new small groups for the capacity reason may not offer coverage in that service area to new employer groups other than small employers until it resumes enrolling new small employers there.

Oregon states the parallel availability rule for other than small employer groups separately, in ORS 743B.104: a carrier offering a group health benefit plan to a group of two or more prospective certificate holders may not decline to offer coverage to an eligible prospective enrollee, or impose different terms, premiums or contributions based on the enrollee’s actual or expected health status. That section says expressly that it applies only to group plans that are not small employer plans, so the two markets are governed by different sections that say similar things.

Renewability of coverage (ORS 743B.013(3))

Each small employer health benefit plan is renewable at the option of the policyholder, small employer or contract holder with respect to all eligible enrollees, unless one of Oregon’s listed grounds applies:

• Failure to pay the required premiums
• Fraud or intentional misrepresentation of a material fact by the policyholder, small employer, contract holder, an enrollee or an enrollee’s representative
• Enrollment falls below the number or percentage required by the plan’s participation requirements
• The small employer fails to comply with the plan’s contribution requirements
• The carrier discontinues both offering and renewing all of its small employer plans in the state or in a service area
• The carrier discontinues a plan in a service area because it could not reach agreement with providers there
• The Director orders discontinuation on finding that continuing would not be in the enrollees’ best interests, or would impair the carrier’s ability to meet its contractual obligations
• For a network plan, no enrollee any longer lives, resides or works in the provider network’s service area
• For a plan offered through a bona fide association, the employer’s membership ceases for a reason unrelated to any enrollee’s health status

Modifying a plan at renewal is not a discontinuation.

The notice periods are testable:

Situation	Notice and waiting period
Discontinuing all small employer plans statewide or in a service area	Notice to the department and all policyholders; no cancellation for 180 days
Discontinuing in a service area for failure to reach agreement with providers	Notice to the department and all policyholders; no cancellation for 90 days
Discontinuing a particular plan	Written offer of all the carrier’s other small employer plans, made at least 90 days before discontinuation

A carrier that discontinues offering or renewing all of its small employer plans is barred from that market in Oregon for five years (ORS 743B.012(9)), a period the department may shorten only where necessary to keep the market competitive.

Rescission is treated separately (ORS 743B.013(5) and (6)). A carrier may not rescind an enrollee’s coverage, or a small employer’s plan, unless there was fraud or an intentional misrepresentation of a material fact, and then only with at least 30 days advance written notice and notice to the department.

Participation requirements (ORS 743B.013(7))

A carrier may continue to enforce reasonable employer participation and contribution requirements on small employers, but those requirements must be applied uniformly among all small employer groups with the same number of eligible employees applying for or receiving coverage.

Two Oregon rules limit what a carrier can do with them:

• In determining minimum participation, a carrier counts only employees who are not already covered by an existing group health benefit plan, Medicaid, Medicare, TRICARE, the Indian Health Service, or a publicly sponsored or subsidized health plan
• A carrier may not deny a small employer’s application for coverage based on participation or contribution requirements. It may only require a small employer that does not meet them to enroll during the open enrollment period beginning November 15 and ending December 15

That is the practical difference from the participation conventions often quoted as industry practice. In Oregon a shortfall delays the group to open enrollment; it does not shut the door.

Rating small employer plans (ORS 743B.013(8))

Premium rates for small employer plans other than grandfathered plans may vary only on factors Oregon allows, as prescribed by department rule:

• The ages of enrolled employees and their dependents, except that the rate for adults may not vary by more than three to one
• Tobacco use, except that the rate may not vary by more than 1.5 to one
• Adjustments to reflect differences in family composition

Variation between different plans a carrier offers small employers must rest on objective differences in plan design or coverage, age, tobacco use and family composition — never on the risk characteristics of the groups assumed to select a plan. A carrier may not increase a small employer’s rates more than once in a 12-month period, and annual increases take effect on the plan anniversary date.

At the point of sale the carrier must disclose the full array of plans it offers small employers, its authority to adjust rates and the extent to which it considers age, tobacco use, family composition and geography, and the benefits and premiums of all coverage the employer qualifies for (ORS 743B.013(10)).

Purchase policy through the exchange or marketplace (ORS 743B.010, ORS 741.300)

Oregon’s health insurance exchange is the division of the Oregon Health Authority that operates an American Health Benefit Exchange under federal law. The exchange for small employers is the Small Business Health Options Program, or SHOP.

Where the employer buys changes two things:

• A plan issued outside the exchange carries the annual employee re-count described above. A plan issued through the exchange does not
• Oregon’s small employer rules continue to apply to a plan bought outside the exchange until the plan anniversary following the date the employer stops being a small employer. For an employer covered through the exchange they continue until that employer both stops receiving coverage through the exchange and is no longer a small employer

Lesson summary

• A small employer in Oregon employed an average of 1 to 50 full-time equivalent employees in the preceding calendar year and employs at least one on the first day of the plan year (ORS 743B.005). Oregon does not use the older 2-to-50 formulation.
• A small employer plan may not apply a preexisting condition exclusion, may require an affiliation period of no more than 2 months (90 days for a late enrollee), and may impose a group eligibility waiting period on a late enrollee of no more than 90 days (ORS 743B.013).
• A carrier must offer every approved small employer plan and issue any plan a qualifying small employer applies for (ORS 743B.012). The parallel rule for larger groups is ORS 743B.104.
• Plans are renewable at the policyholder’s option except on Oregon’s listed grounds. Leaving the market takes 180 days notice; leaving a service area over a provider-agreement failure takes 90 days; a full market exit bars the carrier for 5 years (ORS 743B.013(3), 743B.012(9)).
• Participation and contribution requirements must be uniform, must not count employees covered elsewhere, and may never be grounds for denying an application — only for deferring the group to the November 15 to December 15 open enrollment period (ORS 743B.013(7)).
• Rates may vary only by age (3:1 maximum for adults), tobacco use (1.5:1 maximum) and family composition, and may not rise more than once in 12 months (ORS 743B.013(8)).
• Small employers may buy inside or outside the exchange. Plans bought through the exchange are not subject to the annual employee re-count (ORS 743B.010, ORS 741.300).