Ask A Benefits Advisor: How Do Multi-State Employers Handle Health Insurance Compliance?

September 11, 2015
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Category: Ask Bud

PEO Considerations

Bud Bowlin has been advising business owners about health insurance and benefits for more than 35 years. For his 70th birthday, we gave him his own advice column. Got a burning benefits question for Bud? Send it to AskBud@zenefits.com.

Dear Bud,

I run an advertising agency in San Francisco with over 50 employees. Next year, we’re opening offices in Austin and Seattle. What do I need to know about health insurance so that my company stays compliant across state lines?

Healthcare Across States is Baffling


 

Dear H.A.S.I.B.

I remember when geographic borders used to limit businesses, but we’re in an exciting time where technology opens wide the frontiers of expansion.

When crossing state lines, it’s important to know that insurance carriers are regulated at the state level. For instance, your employees in San Francisco are legally required to participate in California Short-Term Disability Insurance. But SDI isn’t mandated in all states, and some states require out-of-state employers to maintain in-state Workers’ Compensation Insurance. You’ll want to talk to your broker about new compliance requirements as your company grows into new states. It’s our job to know this stuff–so you don’t have to!

Because each state individually approves insurance plan designs and rates, you can end up with employees who have the same carrier but different coverage. Although premiums for employer-sponsored individual and family insurance plans have risen across all states over the last few years, California routinely tops the list. So, as a consolation prize for leaving the sun, employees exiting California can look forward to less expensive health insurance. That said, California’s higher premiums come with more required coverages. An employee getting fertility treatment in California may have to pay out of pocket (or do an old-fashioned rain dance) in Washington.

Of course, all carriers in all states must comply with federal regulations. The ACA (Affordable Care Act) mandates that employers provide affordable coverage with minimum value. HIPAA (the Health Insurance Portability and Accountability Act) made it illegal to base health insurance premiums or plan designs on health factors. These are just two examples of many, but if your company is compliant with federal law in California, you’ll be fine in the other states.

Speaking of compliance issues, probably the most critical role that your broker provides is steering you through the maze of notifications, filings and local regulations that even the most diligent employer couldn’t possibly know. Underwriting guidelines vary by state, and your broker uses these guidelines to ensure your company doesn’t stray into penalties and compliance problems.

Fortunately, the large, national insurance carriers have developed strategies to encompass the multi-state needs of employers. Medical carriers like United Healthcare, Aetna, Humana, and the BCBS organizations have made great strides in developing products and networks that are accessible from many states. This allows employers like you to provide virtually the same benefits to your employees, regardless of what state your employees are in. As your company grows, you’ll want to make sure your broker keeps you with carriers that offer a large repertoire of plans, allowing employees a broad selection of choices.

I wish you well, my friend, on your journey into becoming a multi-state company. Keep your broker close as you navigate these waters. My colleagues and I are always here to help.

Read More Ask Bud

Got a question about benefits and insurance? Send it to AskBud@zenefits.com.

The answers on Ask Bud serve as basic guidelines and are for informational purposes only. Bud is a treasure trove of knowledge, but is unable to provide legal, tax, or fact-specific human resources advice. Once a question is submitted, Bud and Zenefits reserve the right to accept, reject, edit, modify, or otherwise change it. All content on the Zenefits website, including questions received and answers provided by Ask Bud, are Zenefits property.

About

After working in the field of psychology research for years, Bella loves sharing what she's learned in a more directly impactful context. She's interested in the intersection of people and business, and wants to promote conversations about HR. She's an amateur ceramicist, pro dog walker, and produces podcasts on the side.

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