What are carve outs?
Q: What are carve outs?
A: Some companies may wish to only provide health insurance to a very specific class of their employees or they may wish to provide a different level of insurance through a different insurance carrier, based on a class of employee. An example may be a company that only wishes to offer health insurance to employees in a managerial position. Limiting the employees that are able to enroll in the group health plan is referred to as a group carve out. Common types of group carve outs include management only, union vs. non-union and salary vs. non-salary. It is up to the sole discretion of the insurance carrier if they wish to allow carve outs and they may place limitations on the types of carve outs they accept. The insurance company may also request that a carve out group meet the standard minimum participation requirements or may even require 100% participation for all eligible employees within that carve out group.
Carve out groups are not usually protected under state or federal health insurance regulations that require small group medical plans to be guaranteed issue. This means that the insurance carrier may request health questionnaires from each employee to be included in the carve out group and may decline to provide coverage to that group if any member of the group falls into a high-risk classification. If other health insurance coverage is offered to all other employees excluded from that carve out group, the insurance carriers may be required to insure that carve out on a guaranteed issue basis. This would occur if the carve out is created to offer a higher level of benefits to employees within that specified group. Furthermore, the insurance companies may limit the plan options that are available to any company wishing to apply for health insurance for a carve out group. Therefore, the options available to carve outs may be limited and insurance carriers may also require that they insure 100% of the group and not allow the employer to offer alternative options to these employees through other health insurance carriers. A minimum number of carve out members may also be requested by the insurance carrier that provides carve out options to small groups.
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