Are Opt-Outs on the Way Out?
By Danielle Capilla, Chief Compliance Officer for United Benefit Advisors
Opt-out payments or cash in lieu of benefits have been a staple in the employee benefits industry for many years. Employers offer individuals who are eligible to enroll in their group health plan a sum of money, typically paid monthly, to those who waive enrollment in the group health plan. Employers who offer group health plans often use opt-out payments to share the savings they receive when an employee chooses not to enroll in the benefits offered.
These opt-out arrangements can take two different structures:
- Conditional opt-outs require the employee to satisfy a condition in order to receive the opt-out payment. Typically the condition is proof of other group minimum essential coverage (MEC).
- Unconditional opt-outs are offered to all employees and simply require the employee to waive coverage under the group health plan.
For many years, so long as employers were offering opt-outs uniformly to all benefit-eligible employees, the government had little, if any, regulation over opt-outs. However, beginning in 2015, multiple government agencies began tightening the parameters around permissible opt-outs and, in some situations, appear to restrict them completely. Employers are experiencing increased scrutiny over opt-outs from various agencies because of recent regulatory guidance.
For detailed information on opt-out positions being taken by the Centers for Medicare & Medicaid Services (CMS) and the IRS, as well as best practices in light of recent regulatory guidance, request UBA’s ACA Advisor, “Are Opt-Outs on the Way Out?”.
As multiple government agencies are tightening the parameters around permissible opt-outs, many employers have been dropping opt-outs before they become a compliance problem. In fact, according to the UBA 2016 Health Plan Survey, only 2.8% of employers offered a bonus to employees to waive medical coverage in 2016, a 20% decrease from three years ago. But for those that do, the bonus amount is on the rise. The average annual single bonus in 2016 is $1,884, a 12% increase from last year.
For all the latest 2016 Health Plan Survey benchmarking data on health plan costs and design, download the newly released Executive Summary.