Qualifying for California group health insurance for new companies can be more difficult than for established companies.
Usually, when we first start a discussion with a prospective company, pretty soon into the conversation the topic of when the company was formed comes up.
It is important to tackle this first before going into all the plan detail and other qualifications.
Most of the issue comes down to the AB 1672 law and company requirements needed to qualify for Guaranteed Issue in California.
Let's first take a look at AB 1672 in terms of how it affects new companies.
You can always run your quote here:
You can find more detail on the California group health eligibility requirements page
That's the synopsis of the rule but the key part for a new company is the 1/2 of the prior calendar quarter.
For example, if we want a Jan 1st or later effective date, we need to have the two people tied to the company before 11/15 of the prior year (45 days essentially).
If the start for eligibility is 11/25, then it actually pushes you out to 4/1 of the next year.
The first thing is to establish is how a person can be formally tied to the company and the second part is to establish when the formal relationship begins.
There are two main ways to be eligible for Group health benefits.
This is an official document that is submitted to the State.
The carriers look at the DE6 as a trustworthy document to establish a person's legitimate employer-employee relationship with the company.
As a side note, they also can infer part-time or full-time status from the amounts paid.
The DE6 shows the number of employees in each of the three months that make up the prior quarter.
The documentation requirements differ depending on the structure of the business if a person is not showing on payroll.
Following are some general guidelines according to company structure:
A Sole Proprietor is essentially a person that owns the company in his/her own name.
The carriers typically require a current Schedule C which is the tax document submitted for Sole Proprietors.
Usually, a California business license or Fictitious Business Name filling can be substituted if you are in your first year of business and have not submitted a Schedule C yet.
The underwriter will look at the stamped date of processing from the State to establish eligibility for the 1/2 of the calendar quarter requirement.
A LLC is a more formalized partnership.
If a K1 is not available for a new company, the carrier will typically accept a Statement of Information or Articles of Organization with Operating Agreement.
They also need to list the officer in question.
The carrier will require a Statement of Information and/or Statement by Domestic Stock Corporation or Articles of Incorporation (filed and stamped listing Officers).
Again, the underwriting will go based on the stamped date of the document that lists the Officers (usually the Statement of Information).
The carrier will typically require the K1 (similar to LLC).
If the K1 is not available due to length in business, the carrier will require a partnership agreement and Federal Tax ID appointment Letter.
Limited partners in a partnership are usually required to be on the DE6/DE9 or payroll.
This is a lot of information and typically very confusing for new companies that are investigating Group health insurance in California.
Due to the complexity, it's probably best to go over your company's situation with us as your California health insurance agent first.
There is no cost for our assistance and we have helped 1000's of California companies navigate these requirements.
This can save you a lot of frustration and potentially wasted time.
You can start the process by running your California group health insurance quote or by contacting us with your situation.
With the passage of the ACA law, there are some changes to consider.
Open Enrollment for Small Group
There is now a group open enrollment at the end of each year during which a company may be able to enroll without meeting the requirements above.
This can definitely affect a new company enrolling in benefits.
Check with us at 866-486-6551 to see if you can take advantage of this window.
You can request the online application here:
Aside from the prior calendar rule, the other issue that we typically see is getting the require number of eligible employees to go with the plan.
This comes up with small to mid-size groups where employees are declining coverage. Some quick notes on the definition of "eligible".
1099 or contract employees are not considered eligible for California group health insurance
Part time employees working under 30 hours weekly can be included or not depending on what the group chooses.
If the company chooses to cover part time, they then figure into the 75% calculation
Employees on another qualified Group health plan are not part of the eligible pool.
Newer companies usually have fewer employees as they are just starting and that can be an issue.
A side rule to this is the majority rule in California for companies with employees in other states.
At least 51% of total (not just eligible) employees need to be California.
Why offer Small Group health insurance
How to Choose a Group Health Plan
Again, there is absolutely no cost to you for our services. Call 800-320-6269 Today!