You Snooze, You Lose

Active open enrollment has myriad benefits but always demands participation.
 

By David G. Zick
 
 
From time to time, most companies debate whether or not to offer their employees active open enrollment. Under passive enrollment, employees who do nothing during the time period continue with their current benefits, along with whatever new employee contributions and employer-made-changes that apply. But under an active enrollment, employees who do nothing get nothing—literally losing whatever coverage they had.
 
 
Smaller employers can generally administer an active open enrollment with far more ease than large employers. For example, if all employees are at one location and everyone gets the same benefits, communication is much simpler. However, the possible problems an employer may face can quickly escalate if the organization has multiple locations, plans, and eligibility groups.
 
 
While there are many reasons to consider having an active open enrollment, there are critical decisions and potential consequences that should be identified and evaluated as part of the decision process. Armed with the right information, a large organization can avoid many problems.
 

Considerations for Active Open Enrollment
The possibility of active open enrollment stems from several factors. Organizations should consider the following objectives:
 
 
Change in carriers and/or benefits. This is likely the main reason most companies would consider having an active open enrollment. If an employer is switching carriers and/or benefit offerings, enlisting an active open enrollment is one way to make employees pay closer attention to the change. When making a significant alteration, it can be difficult to create a default plan choice for employees who fail to make a plan election.
 
 
Data issues. Transferring data can also pose a risk. Organizations need to ensure that eligibility information is current, including addresses, dependent information and elected benefits. There may be employees whose coverage was grandfathered in from an acquisition, where the original enrollment records are missing or difficult to access. An active open enrollment is an opportunity to ensure the correct information about the employee is available and in the system.
 
 
Change in network provider selection. If a medical, dental and/or vision network is changing, an active open enrollment will draw attention to the possibility that an employee will have to change where they get services covered at in network levels.
Make employees more aware of their benefits. In the age of healthcare reform, benefits are being a differentiator for organizations. Active open enrollment provides the opportunity to showcase a company’s benefit offerings and stress the value of the offerings and the generosity of the employer’s contributions toward the employee’s benefits.
 
 
Participation in wellness initiatives. Bringing light to wellness initiatives will get employees’ attention and let them address any new requirements (i.e., completing a health risk assessment and/or biometric screening) that are incumbent to achieve maximum benefits.
 
 
Informal dependent audit. Employees may not pay attention to an event that causes a loss of dependent eligibility, especially if the incremental cost of keeping an extra dependent on coverage is small or nonexistent. Forgetting to remove a former dependent is often just a function of neglect although there are occasions where it is intentional. An active open enrollment is an opportunity to get employees to review who they are including, and makes them more likely to remove ineligible dependents from enrollment.
 
 
Taking Into Account Carrier Issues
Active open enrollment can open communication channels on selecting medical, dental, and vision providers. For example, if you are changing HMO plans or adding a new HMO, employees are required to select a primary care physician. An active open enrollment drives employees to notice if their medical providers are in-network or out-of-network and helps to make decisions that can benefit both the employees and the organization.
 
 
When it comes to short and long term disability insurance, if employees pay some or all of the cost of coverage and enrollment is optional, you need to take a few steps. You need to identify whether the plans have provisions that either restrict benefits for pre-existing conditions for late enrollees, or deny enrollment without evidence of insurability for employees who do not enroll when first eligible. This is potentially a dangerous area to overlook. Most large employers self-report eligibility, and problems caused by improper enrollments may not become evident for some time—maybe years—after an improper enrollment. If your plan has late enrollee restrictions, you may be able to negotiate with your carrier to have a special opportunity for employees (who have not previously been declined coverage) to enroll without evidence of insurability.
 
 
As with long-term disability, late enrollees are typically required to provide evidence of insurability to enroll. This coverage is also typically self-administered, so problems associated with incorrect enrollments may not show up for years. It is important to discuss conditions for enrolling employees who previously declined coverage with your carrier. As with disability coverage, you may be able to get a special opportunity for employees (who have not previously been declined coverage) to enroll without evidence of insurability.
 
 
Opting for Active Enrollment
To minimize any problems caused by active enrollment, consider the following:
How will you collect updated data and enrollment elections? The best approach is to collect information electronically. Avoid having employee communicate their changes on hardcopies. Otherwise, HR may end up spending countless hours trying to decipher handwritten information, and auditing for changes.
 
 
How will you address your plans that require evidence of insurability for late enrollees? You might be able to get your carrier(s) to waive the requirement for anyone who has not previously been declined for coverage after applying as a late enrollee. If not, communicate that even though there is an active open enrollment, evidence is required for anyone who elects coverage as a late enrollee, as determined by the carrier. Then, you have to make sure you administer this correctly—it would be easy to overlook the fact that late enrollees, even in an active open enrollment, have to complete evidence of insurability and be accepted for coverage.
 

What are your carrier issues? Prior to an active open enrollment, it is recommended to speak with each carrier to clarify how they will work with you through an active open enrollment. How tolerant of late enrollment will they be for employees who fail to elect coverage but don’t realize it until after the new plan year? Will they agree to waive the normal late entry provisions and/or evidence of insurability requirements for a one-time special enrollment?
 
 
Are there union considerations? Look to the union contract to see if there is anything that precludes an active open enrollment. Notify the union of the pending active open enrollment and solicit their assistance in making sure their members are aware of the requirement to re-enroll. You may find some unions will challenge your right to require an active open enrollment; it’s better to know up front than to scramble in the middle of an open enrollment.
 
 
Do you have an active enrollment? If you are doing a partial active open enrollment, there are fewer issues than a complete active open enrollment. Are there enough advantages to doing a complete active open enrollment to justify the extra potential issues? When you review your reasons for doing an active open enrollment, you may find you can accomplish what you want while leaving some plans with a passive open enrollment.
 
 
Minimizing Employee Neglect
Even with a strong communication plan, some employees who need coverage will still fail to complete an active open enrollment. The reasons run the gamut: They were on vacation, did not get their material from their manager, lost their material, forgot the enrollment deadline. The bottom line is that chances are it will happen.
 
 
To minimize this risk, you need to go to every length to communicate. Use every medium at your disposal. Put posters up in the lunch room, remind employees in staff meetings, highlight it in newsletters, and prominently announce it in your open enrollment material. Relying on one type of communication—such as an email for an electronic enrollment—is not sufficient.
 
 
As soon as open enrollment is completed and before the new plan year starts if possible, identify all employees who are losing coverage from not participating. Notify them individually of the pending loss of coverage.
 
 
COBRA and PPACA Considerations
After an active open enrollment and some employees drop dependents from their coverage, what is your company’s COBRA obligation? If you are notified of the loss of eligibility within 60 days of the actual loss date—and assuming you have previously complied with COBRA eligibility when coverage began—you should check with your legal adviser, but you may not be obligated to offer COBRA. In addition, PACA regulations may preclude an employer from dropping medical coverage for employees who fail to make an election during an active open enrollment.
 
 
So what’s the right answer? Circumstances will play a major role since an active open enrollment is a lot more work, and requires much more thought.
 


David G. Zick is president of Bingham Farms, MI-based Group Associates, Inc., a proprietary outsourced benefit management solutions company. He may be contacted at david.zick@groupassociates.com.
 

Posted March 28, 2012 in Engaged Workforce

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