The state of the 2014 small group market and 5 facts you need to know about renewals
Based on the new Affordable Care Act guidelines, employers with less than 50 eligible employees need to understand that the following changes will take place at renewal beginning 1/1/14 – so be ready.
- Rating factor changes: Massachusetts will lose some of the rating factors that are currently being used to develop rates, (ie. company size, participation and industry) leaving the carriers with the ability to only use age and geography as additional rating factors. Therefore, there will be winners and losers. It is predicted that white-collar businesses as well larger companies with 25-50 employees will be negatively impacted while blue-collar, smaller organizations with less than 5 employees or companies with smaller family sizes will be positively impacted. The total impact of these rating changes will be phased in over 3 years so 2014 is just year one impact.
- It is predicted that 35% of small group businesses will see an increase of anywhere between 15%-70%!
- Moving to “per member” calculations: In addition, going forward, rates will be calculated on a “per member” basis – the number and ages of dependents will be taken into account.
- Plan Design Changes: All Small Group plans must fit into a metal tier (Platinum, Gold, Silver and Bronze) and a precise AV (actuarial value) assessment.
- They must contain the ten ACA prescribed Essential Health Benefits, which include pediatric dental coverage.
- Carriers are changing the products they have available currently in the small group market. Employers that are covered on a closed plan will be mapped to the closest plan at renewal. Deductibles will be capped at $2,000/$4,000 and out-of-pocket maximums will be capped at $6,350/$12,700
- New Fees: anywhere from 2.5%- 3.5% of new ACA fees and taxes will be added to premiums. These fees are in addition to medical/rx trend which is predicted to run between 7-10% for 2014.
- 2016 Merger: the 2-50 and 51-99 markets are scheduled to merge on 1/1/16. Currently, companies in the 51-99 size range that have positive claims experience, receive additional rate relief. These discounts will be disallowed January 1, 2016.
Some strategies for consideration:
- Early renewal: All of the carriers are allowing small groups to renew early for 12/1 in order to lock in rates prior to the ACA changes taking effect on 1/1/14. It is important to note that deductibles within plans will reset.
- Consider changing the contribution strategy
- Consider steering employees into Consumer Driven health plans
- Offer limited networks/tiered network plans
For more information, you are encouraged to contact WGA’s Employee Benefits team.
About the Author
Kerry Hands is a Senior Vice President at William Gallagher Associates in the Employee Benefits Practice, with an expertise in healthcare and healthcare reform targeting high technology companies in the small/midsize market space.