Revised Definition of Small Employer

BULLETIN

To:

Small Group Carriers

Re:

Revised Definition of Small Employer

Date:

May 2, 2000

Bulletin:

Life and Health 00-12

We would like to bring to your attention two bills that passed the legislature and are

awaiting the Governor's signature. Senate Bill 801 and House Bill 649 of the Acts of

2000 are scheduled to become effective June 1, 2000. These bills are identical and will

require each carrier to amend its contracts and method of determining who qualifies as

a small employer in Maryland. In particular, the following changes are effected by these

bills, and in all likelihood, will require changes to each carrier's small group contracts

used in Maryland.

1. Revision of portion of small employer definition dealing with the self-employed--§15-

1203(c)(1) of the Insurance Article is amended to require the self-employed person to

"work and reside" in Maryland. Previously the law required the self-employed

person to live, work or reside in Maryland.

The change described above is a restriction on the definition of self-employed and

will reduce the number of persons who qualify as self-employed. Please note that

the legislature added transitional language in Section 3 of each bill to protect

persons who once met the definition of self-employed and now cease to meet it due

to the change in the definition. These persons will be allowed to renew their

coverage for as long as they continue to meet the definition in effect on the date they

originally applied for coverage.

2. Revision of small employer definition dealing with how to count eligible employees--

§15-1203(b)(1)(i) of the Insurance Article is amended to require carriers to determine

if the small employer met the definition of small employer based on the preceding

calendar quarter, instead of the preceding calendar year. Also, §15-1203(b)(3)(ii)(1)

of the Insurance Article is deleted. The deleted text affects how a carrier will count

the number of eligible employees

nt eligible employees--

§15-1203(b)(1)(i) of the Insurance Article is amended to require carriers to determine

if the small employer met the definition of small employer based on the preceding

calendar quarter, instead of the preceding calendar year. Also, §15-1203(b)(3)(ii)(1)

of the Insurance Article is deleted. The deleted text affects how a carrier will count

the number of eligible employees. A carrier may no longer exclude those employees

who are covered under a public or private health insurance plan or other health

benefit arrangement in the count of eligible employees.

Once again, the transitional language found in Section 3 of each bill permits

employers who previously met the definition of small employer and who cease being

small employers based solely on the new definition to continue to renew previously

purchased coverage.

3. Deletion of portion of small employer definition that permitted one-life groups--§15-

1203(f) of the Insurance Article, the portion of the law that included as a small

employer those employers who want coverage only for one employee because all of

the other employees are covered under other coverage, is deleted.

As discussed above, the transitional language found in Section 3 of each bill permits

employers who previously met the definition of small employer and who cease being

small employers based solely on the new definition to continue to renew previously

purchased coverage.

If you have any questions on this matter please call (410) 468-2170 and mention this

bulletin by bulletin number.

_________________________

Donna B. Imhoff

Associate Commissioner