Oh no, we forgot to take that guy off our bill!
Before I get into this it is important to understand we will be talking about honest people making honest mistakes that reasonable people should be able to fix. However, contracts, modern technology and ACA regulations, all come together to make this a serious legal issue.
Here is the question.
“Bill, we just realized we terminated an employee 9 months ago, but we forgot to delete them from our billing! Please go get 9 months of premium back for us!”
Sounds simple, right?
Well, here is my question to all of you – will I be successful if I request that from an insurance carrier?
The next question is what will happen if I am successful, and also, if I am not?
So, will I be successful – NO! And in most cases the employer is better off to terminate the employee as soon as possible and forget about getting that back premium refunded.
In most cases insurance carriers have a contract provision that allows the employer to repair a mistake like this retroactively for up to two months (60 days). For more than that the employer would need some very compelling arguments to prevail.
And then – what happens if I am successful? That is usually very complicated and depends on several issues.
Has the terminated employee filed any clams on the terminated policy?
If this has occurred, the insurance company cannot reverse this claim without somebody potentially getting accused of insurance fraud.
Why would that happen? In most cases the terminated employee is not aware the claims have been submitted. They go to their doctor who uses an automated claims system. The system goes out and finds an “active” medical plan, the one the employee originally told the doctor to use, and files the claim. The insurance company gets that claim and auto adjudicates it because the employee has not been terminated in the system.
If no claims have been filed, can the employer get the back premium refunded? Probably not!
Under the insuring contract that terminated employee has had coverage the entire time, the insurance company was on that risk, and would have paid any contractually correct claims. And the contract agreement usually calls for a maximum correction period of 60 days. The employer now must explain why they maintained coverage on an ineligible participant and might be subject to a payroll audit for eligibility on the entire group.
Is there a discrimination issue? Possibly if anybody figures it out and takes the time to pursue it. (I know, I am stretching here)
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- Similarly situated, terminated, employees. If other employees were terminated but did not get coverage, do they have a case?
- When the employee was terminated the employer moved from paying some percentage of the premium to paying 100%. Do currently employed participants have a discrimination claim?
Are there any insurance fraud problems? Oh yea! In most cases nobody wants to go here but it is possible.
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- The physician would have to be required to reimburse the employer, and the insurance plan (insurance company), for the erroneous claim they made. Remember they made a valid claim, and it only becomes erroneous if the premium reversal is agreed to.
- The terminated employee will be subject to billing and collection by the physician if the premium, and then claims, are reversed.
- What if the employee was issued other coverage by a different insurance company and they paid the claims as well?
Are there ACA issues! You betcha!
If the terminated employee applies, and is issued a personal medical plan, under ACA (the Exchange) and is given a subsidy, they will be subject to a full redemption of the subsidy when the employer coverage is discovered. The employer will probably receive a 22J letter asking why the employee got an ACA plan when they clearly had employer coverage? And that may cause 1095/94 filing issues with the IRS.
If the terminated employee got ACA coverage in a state that imposes penalties for fraudulent application, and dual coverage situations, they may penalize the employee, and rescind their fraudulently obtained medical plan.
This typically occurs when the employer uses an auto pay feature for premium payment. But it points out the importance of diligence in billing and benefits departments.