Q&A #110 – Are small nonprofits required to provide paid interns with health insurance?
Question: We are a small-staffed nonprofit organization that will be having several paid interns during the summer. We expect that the interns will work a full-time schedule of 40 hours per week during the two months of their internship. If we treat these paid interns as employees, will we be required to cover the interns under our group health insurance plan?
Answer: As discussed in Q&A #108, paid interns usually must be treated as employees. Whether a particular employee is required to be offered coverage under an organization’s group health insurance plan is determined first and foremost by the eligibility rules set forth in the plan document and summary plan description (SPD). For small-staffed organizations that do not meet the definition of an “applicable large employer” under the Affordable Care Act, the main consideration will be how the terms of the plan are drafted.
Unless an organization qualifies as an “applicable large employer” under the Affordable Care Act (which generally means the organization has at least 50 full-time or full-time equivalent employees during the prior year), there is generally no requirement to offer health insurance coverage at all.
Once health insurance coverage is provided, however, the eligibility and other rules set forth in the plan document must be applied equally to all the organization’s employees. In other words, if an employee qualifies for coverage under the terms of the plan, then coverage must be offered. Particular types of employees cannot be excluded from coverage unless the exclusion specified in the terms of the plan document and SPD.
The terms of the plan are largely based on the requirements of applicable state law, but the health insurance carrier’s application for coverage will typically offer a few options. For example, it is common to cover full-time employees (who work, on average, at least 30 hours per week) while excluding part-time employees. There is also sometimes a waiting period before an employee becomes eligible for coverage for example 30 days, 60 days, or 90 days from the first day of employment (under federal law, waiting periods cannot exceed 90 days). Carve-outs for particular types of positions are less common, but check the plan documents to be sure.
Thus, if a paid intern will be working a full-time schedule and satisfies the waiting period and other eligibility requirements specified under the plan, then the intern must be offered coverage. While it may be tempting to lengthen the waiting period to avoid having to cover summer interns, keep in mind that this same waiting period will apply to all new employees (which is usually not a desired result).
Planning Tip – Having temporary or short-term employees who work full-time, such as paid interns, may have implications under a wide range of employment terms and benefits besides group health insurance coverage, including 401(k), vacation leave and PTO, and other benefits. Before bringing on paid interns, review your employee handbook and other plan documents closely to assess whether eligibility has been adequately addressed. Some benefits (such as vacation leave) might have more flexibility than others (such as sick leave).
For organizations that qualify as an “applicable large employer” under the Affordable Care Act, the picture is more complicated since there are specific rules governing the coverage of “seasonal employees.” For all other organizations, the issue will be determined by looking to the eligibility terms of the organization’s plan documents and SPD, and speaking with the organization’s professional advisors about your options for changing the terms of the plan in the future.
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