Out-of-state employees can add a level of complexity to your insurance. Here’s what you need to know about out-of-state insurance mandates and your policy.
We have a business based in Virginia with one employee in California. Virginia doesn’t mandate coverage for weight loss issues such as bariatric surgery, etc., so our plan doesn’t cover these procedures. California, however, does require this coverage.
Our California employee is stating the plan based out of Virginia is required to comply with the mandated obesity treatments required by California. I’ve been under the impression that the regulations in the state of the plan’s home situs take precedence. Can you help on this?
Mandates In Laws Aren’t Germanely Required in Other States
After recent discussions about state-wide changes to the federal government’s Affordable Care Act, the important fact relating to your question is that individual states are responsible for regulating insurance in their respective states. (Note that my comments here are for fully insured medical coverage only.)
In your case, Virginia, the state in which you’re located—and where the insurance contract was presumably signed—is considered the “situs.” (Situs is defined as the place where something exists or originates.) Since each state is responsible for regulating insurance within its boundaries, Virginia insurance laws govern your contract. So, just because you have an employee in California doesn’t mean that California insurance law must be followed. Thus, you are correct, and you are not mandated to cover weight loss surgery in California.
Now, while I have your attention, it’s worth pointing out a few important considerations with regard to the insurance carrier’s underwriting guidelines. Some carriers have requirements governing how many employees can reside outside the governing state, what percentage of employees can waive coverage, etc. The insurance plan itself may also be restricted to a particular geographic area or state boundary. (Many HMOs, for instance, are limited to a particular state.)
If any of this strikes a chord, you should refer to your broker to make sure they have the correct plans in place for out-of-state employees. Also, your broker should be running interference for you when you add out-of-state employees to insure your state mandates are being legally followed so that you do not incur any kind of liability. Your broker should also be verifying the mandates that are actually required.
Right now, I’m working on a large group that may have to move the situs of their group medical coverage because of the restrictive nature of some of the mandates in their home state. Fortunately, a company does have some flexibility in which state they select to be their contract state. To conclude, your contract state’s insurance laws govern your plan requirements. California is a beautiful state, but your insurance is not subject to their mandates. Be gentle breaking the news to your out-of-state employee.
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