Small Employers, HIPAA, Continuation and Conversion
Three sets of Wisconsin rules decide who can get and keep employer health coverage. Chapter 635, Wis. Stat., governs selling health insurance to small employers. Sections 632.745 to 632.7495 carry the federal HIPAA protections into Wisconsin law. Section 632.897 lets people who lose group coverage keep it or convert it. Each one limits what you, as an intermediary, may do.
Selling to Small Employers (ch. 635, Wis. Stat.)
A small employer is one that employed an average of at least 2 but not more than 50 employees during the preceding calendar year (s. 635.02 (7) (a)). The chapter covers group health plans for small employers, and individual policies when 3 or more are sold to or through a small employer (s. 635.01). That second part closes a loophole: selling each employee an individual policy does not avoid the small-employer rules.
Guaranteed issue (s. 635.19)
An insurer that sells group health plans in the small group market must accept any small employer in the state that applies, and must enroll every eligible employee who applies when first eligible. The insurer may still set minimum employer contributions and minimum participation, and a network plan may limit sales to its service area.
Rate limits (s. 635.05)
Wisconsin’s statute directs the Commissioner to limit how far small employers’ rates may differ: premiums for groups with similar characteristics may not vary more than 35 percent from the midpoint rate. At renewal, the adjustment for claim experience, health status and similar factors may not exceed 15 percent a year. Federal Affordable Care Act rating rules, covered earlier in the course, also apply to most small-group plans.
Disclosure before the sale (s. 635.11; s. Ins 8.48)
Before completing an application, you give the employer a form disclosing the insurer’s right to raise premiums and what limits the increases, how the group’s characteristics and the plan design affect the rate, and the employer’s renewal rights. You sign and date the form, the employer signs it, and the employer keeps a copy.
Fair marketing standards (s. 635.18)
Neither the insurer nor you may, because of a group’s health status, claims experience, industry, occupation or location:
- discourage the employer from applying, or
- steer the employer to another insurer.
Your commission may not vary with those factors either, so an insurer cannot pay you less for bringing in a group with high claims. You may not encourage an employer to leave any employee out of coverage, and an insurer that declines a small employer must say why, in writing.
HIPAA Protections in Wisconsin Law
You have already met HIPAA’s portability rules. Wisconsin writes them into its own statutes, so OCI enforces them directly.
No discrimination by health (s. 632.748). A group plan may not base eligibility to enroll, or to stay enrolled, on health status, medical condition, claims experience, receipt of health care, medical history, genetic information, evidence of insurability (including conditions arising from domestic violence) or disability. Nor may it charge one member a higher premium than similarly situated members because of a health factor.
The whole group, the whole policy (s. 632.746 (10)). An insurer that offers a group plan must offer it to all eligible employees and their dependents, not to the healthy ones only. It may not attach a rider to the group’s plan, or to one employee’s coverage, that excludes a particular disease or condition.
Special enrollment (s. 632.746 (6), (7)). An employee who declined the plan because they had other coverage may enroll if they request it within 30 days after that coverage ends. Marriage, birth, adoption or placement for adoption opens a special enrollment period of at least 30 days. A newborn enrolled within the first 30 days is covered from the date of birth.
Preexisting conditions (s. 632.746 (1)–(3)). Wisconsin’s statute still states the HIPAA limits: an exclusion could reach only conditions treated in the 6 months before enrollment, could last no more than 12 months (18 months for a late enrollee), and had to be reduced by prior creditable coverage, unless the person had a gap of 63 days or more. Federal law now goes further: a group health plan, or an insurer offering group or individual health coverage, “may not impose any preexisting condition exclusion” (42 U.S.C. 300gg-3 (a)). Know the Wisconsin limits, but tell clients that major medical coverage today has no preexisting condition exclusion.
Guaranteed renewability (s. 632.749). The insurer must renew a group plan at the employer’s option. It may nonrenew only for nonpayment, fraud, failure to meet participation or contribution rules, leaving the market, the group having no one left in a network plan’s service area, or the employer leaving the association the coverage came through. An insurer dropping one type of plan gives at least 90 days’ notice and offers the group its other plans. An insurer leaving a market entirely gives at least 180 days’ notice and may not return for 5 years.
Continuation and Conversion (s. 632.897, Wis. Stat.)
Wisconsin’s continuation law is a state insurance law, separate from federal COBRA, and it applies to group hospital and medical coverage whatever the employer’s size. Specified disease and accident-only coverage are excluded (s. 632.897 (1) (c)).
Who may continue
Anyone covered under the group policy for at least 3 months may continue the group coverage or convert to an individual policy if they are (s. 632.897 (2) (b)):
- an employee or member who loses eligibility for any reason other than discharge for misconduct;
- a former spouse who would lose coverage because of divorce or annulment; or
- the spouse or dependent of a member who dies while covered.
A group policy may not end a spouse’s coverage over a break in the marriage short of a divorce or annulment judgment (s. 632.897 (2) (a)).
How it works
| Step | Rule |
|---|---|
| Employer’s notice | Within 5 days after the employer is told to end the coverage, with the costs and how to pay |
| Election | The person elects and pays the employer within 30 days after the notice |
| Premium | No more than the group rate, including the share the employer had been paying |
| Coverage | Continues without a gap; coverage stays in force until notice is given, if premiums are paid |
Continuation may not end unless the person moves out of Wisconsin, misses a premium, or becomes eligible for similar coverage under another group policy (s. 632.897 (3) (a)). After 18 months on continuation, the insurer may require the person to convert (s. 632.897 (6)).
Conversion
A converting person receives individual coverage without evidence of insurability, reasonably similar to the group coverage, with credit for waiting periods already served (s. 632.897 (4)). If the first premium is paid within 30 days after the notice of termination, the policy takes effect the day after the group coverage ends. An insurer that sells only group policies need not offer conversion, and conversion may be refused if, under the insurer’s filed standards, it would overinsure the person.
Every group certificate must describe these continuation and conversion rights (s. 632.897 (5)). An individual policy that ends a spouse’s coverage at divorce must give the former spouse at least 30 days’ written notice of the right to an individual policy of their own (s. 632.897 (9)).
Lesson summary
- A small employer has 2 to 50 employees; ch. 635 also covers 3 or more individual policies sold through one.
- Small-group insurers must accept every small employer that applies, within rate limits of 35 percent of the midpoint and 15 percent a year for health-related renewal changes.
- Give the employer the signed rate and renewability disclosure, never steer a group by health or industry, and report pressured waivers.
- Group plans may not discriminate by health factor, must cover the whole group, and must renew at the employer’s option.
- Special enrollment lasts at least 30 days; federal law now bars preexisting condition exclusions in major medical coverage.
- After 3 months on a group policy, a departing employee, divorced spouse or surviving dependent may continue the coverage or convert it.
- Continuation is elected and paid within 30 days at no more than the full group rate; conversion requires no evidence of insurability.