Businesses in Texas need to be aware of Texas Senate Bill 51, which establishes rules for how companies handle insurance premiums when a worker leaves their employment. The 2005 bill, referred to as "Group Premium Payment After Termination," amended the Texas Insurance Code effective as of Jan. 1, 2006, and applies to all fully insured managed health care benefit plans provided by Texas employers.
The fundamental provisions of Senate Bill 51 are relatively simple. Employers are responsible for paying an insured employee's premium payments from the time the employee becomes ineligible for coverage until the end of the month in which the employer notifies the insurer that the employee is no longer part of the group and eligible for coverage. In other words, the employer is required to provide coverage under the policy until the end of the month in which a representative of the employer notifies the insurer of termination of the employee's benefits. The legislation effectively prevents employers from asking insurance companies for retroactive cancellation of a terminated employee.
Senate Bill 51 has many practical implications for employers throughout Texas. Each time an employee is terminated, either willfully or otherwise, employers have a long list of exit items to complete. Employers should take note of the following items in order to avoid any further unnecessary liability under Senate Bill 51:
- The statute has a very specific definition of "month," which does not necessarily match the calendar month. The Final Rules from the Texas Department of Insurance on this point have adopted the definition of a month as "the period from a date in a calendar month to the corresponding date in the succeeding calendar month, as provided in the group policy or contract. If the succeeding calendar month does not have a corresponding date, the period ends on the last day of the succeeding calendar month."
- As a result of this definition, employees should be terminated well before the last day of the month whenever possible. For example, if an employer terminates an employee on Aug. 10, the employer would have ample time to notify the insurance provider and would only be responsible for premium payments for the remainder of August. However, if the employee is terminated on Aug. 29, there is very little time for the employer to notify the insurer before the end of the month. If the notification is not received by the insurer until Sept. 1 or later, the employer would also be responsible for the September premium. Terminating employees earlier in the month whenever possible can have a significant cost savings for the employer, particularly if the company employs a large number of people and has a high rate of employee turnover.
- The Timely Notification Requirements of Senate Bill 51 also require appropriate personnel to be available for preauthorization of health/dental care, confirmation of benefits and eligibility between the hours of 8 a.m. and 5 p.m. CST, Monday through Friday, on all days except legal holidays.
- These requirements have no effect on the administration of COBRA benefits, nor do they affect any COBRA continuation periods.
Wellspring Insurance Agency is an insurance benefits consulting firm that assists small- to mid-size employers with issues like Texas Senate Bill 51. Wellspring has a team of innovative and dedicated experts ready to advise companies on a variety of benefits issues. They can even help with outsourcing human resources, risk management and business solutions related to a wide variety of employer-sponsored benefits programs. Visit www.WellspringAgency.com today for more information.