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Management or Employee carve-outs in a employer group health plan, are when some employees are covered and others are not, based on Job Classification of the employees, not their ownership in the company, nepotism (family ties), Salary and Similarly situated employees, must be treated equally.
Management Carve Outs are NOT Guaranteed Issue AB 1672 Small Group Guarantees.
These rules might change under Patient Protection & Affordable Care Act email us with your specific question if you are in California.
The Permissible job classifications under Insurance Company Rules typically are:
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management only,
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union vs. non-union,
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or salary vs. non-salary
and require Insurance Company underwriting approval.
PROHIBITION OF DISCRIMINATION BASED ON SALARY.
(a) IN GENERAL. The plan sponsor of a group health plan (other than a self-insured plan) may not establish rules relating to the health insurance coverage eligibility (including continued eligibility) of any full-time employee under the terms of the plan that are based on the total hourly or annual salary of the employee or otherwise establish eligibility rules that have the effect of discriminating in favor of higher wage employees.
(b) LIMITATION. Subsection (a) shall not be construed to prohibit a plan sponsor from establishing contribution requirements for enrollment in the plan or coverage that provide for the payment by employees with lower hourly or annual compensation of a lower dollar or percentage contribution than the payment required of similarly situated employees with a higher hourly or annual compensation. (Patient Protection & Affordable Care Act SEC. 2716.Section 2716 HR 3590 Page 17)
More on Insurance Company Rules
Some Insurance companies might consider the non union employees as guaranteed issue, if the employer is mandated under a collective bargaining agreement to contribute to Union Labor Fund. Blue Shield Quick Underwriting Guidelins
Blue Cross & Blue Shield require a minimum eight enrolling employees. Kaiser is much more liberal on this.
Email us for the details, as different companies have carve out & participation rules
When you contact us please have the following information ready:
Distinctions among groups of similarly situated participants in a health plan must be based on bona-fide employment-based classifications consistent with the employer’s usual business practice. Distinctions cannot be based on any of the health factors (1182) noted earlier.
For example, part-time and full-time employees, employees working in different geographic locations, and employees with different dates of hire or lengths of service can be treated as distinct groups of similarly situated individuals, with different eligibility provisions, different benefit restrictions, or different costs, provided the distinction is consistent with the employer’s usual business practice.
In addition, a plan generally may treat participants and beneficiaries as two separate groups of similarly situated participants. The plan also may distinguish between beneficiaries based on, for example, their relationship to the plan participant (such as spouse or dependent child) or based on the age or student status of dependent children.
In any case, a plan cannot create or modify a classification directed at individual participants or beneficiaries based on one or more of the health factors. dol.gov/
World At Work.org/
To qualify as an accident and health plan, payments under which are excludable from gross income in computing federal income tax liability, a "plan" must benefit all employees or some identifiable class of employees; a plan can be for as few as one employee but there must be some rational basis other than ownership of the corporation to discriminate among employees. American Foundry v. C. I. R., C.A.9 1976, 536 F.2d 289. Internal Revenue 3161
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similarly situated adj. with the same problems and circumstances, referring to the people represented by a plaintiff in a "class action," brought for the benefit of the party filing the suit as well as all those "similarly situated." To be similarly situated, the defendants, basic facts, and legal issues must be the same, and separate lawsuits would be impractical or burdensome. legal-dictionary
AB 1672 has the same protections for similarly situated individuals
IRC Section § 105
§106
Business Expenses Publication 535
Employer's Tax Guide to Fringe Benefits Publication 15-B
Tax Facts on Life & Health Insurance --- Rules on Corp. Officer and Highly Compensated Employees Discrimination, etc.
Employer Companies that are affiliated companies (common ownership) and that are eligible to file a combined income tax return for purposes of state taxation shall be considered one employer. CA Insurance Code §10700 w 1
Thanks to a visitor of our website - we've learned that you Cannot write a carve-out class of a Small Employer Group in the states of Indiana, North Carolina, Ohio, South Carolina, Texas Virginia, Wisconsin or Wyoming (expressly prohibited by their state law).
Similarly Situated Non-COBRA Beneficiaries
The group of covered employees, their spouses or dependent children who are covered under a group health plan maintained by the employer or employee organization. This group is receiving their benefits under the group plan and not through COBRA continuation coverage. They are most similarly situated to the circumstances of the qualified beneficiary immediately before the qualifying event. Sourcewww.dol.gov/
Law Review Article www.Air.Org
Codes
(a) In eligibility to enroll
(1) In general
Subject to paragraph (2), a group health plan, and a health insurance issuer offering group health insurance coverage in connection with a group health plan, may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan based on any of the following health status-related factors in relation to the individual or a dependent of the individual:
(A) Health status.
(B) Medical condition (including both physical and mental illnesses).
(C) Claims experience.
(D) Receipt of health care.
(E) Medical history.
(F) Genetic information.
(G) Evidence of insurability (including conditions arising out of acts of domestic violence).
(H) Disability.
(2) No application to benefits or exclusions
To the extent consistent with section 1181 of this title, paragraph (1) shall not be construed—
(A) to require a group health plan, or group health insurance coverage, to provide particular benefits other than those provided under the terms of such plan or coverage, or
(B) to prevent such a plan or coverage from establishing limitations or restrictions on the amount, level, extent, or nature of the benefits or coverage for similarly situated individuals enrolled in the plan or coverage.
(3) Construction
For purposes of paragraph (1), rules for eligibility to enroll under a plan include rules defining any applicable waiting periods for such enrollment.
(b) In premium contributions
(1) In general
A group health plan, and a health insurance issuer offering health insurance coverage in connection with a group health plan, may not require any individual (as a condition of enrollment or continued enrollment under the plan) to pay a premium or contribution which is greater than such premium or contribution for a similarly situated individual enrolled in the plan on the basis of any health status-related factor in relation to the individual or to an individual enrolled under the plan as a dependent of the individual.
(2) Construction
Nothing in paragraph (1) shall be construed—
(A) to restrict the amount that an employer may be charged for coverage under a group health plan; or
(B) to prevent a group health plan, and a health insurance issuer offering group health insurance coverage, from establishing premium discounts or rebates or modifying otherwise applicable copayments or deductibles in return for adherence to programs of health promotion and disease prevention.
Participation
            
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Summary of Underwriting Requirements Warner Pacific
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