Column 103 - 2014 Early Renewal Come Home to Roost

2014 Early Renewal Come Home to Roost

The majority of small employer groups who renewed in the last quarter of 2014 postponed their renewal and took an "early renewal" option from their insurance carrier.  Small group in 2014 was defined as groups with less than 50 employees.

This decision was made for a myriad of reasons.  The primary factor was the effect of the ACA on rates and they wanted to postpone it as long as possible.  The ACA is the Affordable Care Act, also known as Obamacare.

The groups with the most dramatic impact were those with primarily younger employees.  The ACA consolidated rate band differentials as well as changed the rating structure.

Prior to the ACA the ratio of lowest to highest rates could be 1:6.  Post ACA it is 1:3.  This means younger persons rates increased quite a bit.  Further, the new rate structure requires that each individual be rated at their individual age.  This includes dependents. 

So rather than have a rate chart with 6-8 rate bands, we now have a rate chart showing rates at each age.  This makes it that much more challenging for the bookkeeper. The good news is that the individual's rate does not change on their birthday month, but rather on the group's renewal date following the birthday.

All small group clients will likely be receiving a 90 day notice letter telling them that their plans will be cancelled as well as their rights due to this situation.  Do not panic.  This notice explains that due to the fact that the plans are not compliant with the ACA, they are being cancelled.  However, at renewal the group will be presented with   options that are ACA compliant.

The rates for 4th quarter have not yet been released, so we do not know for sure how they will compare.  We can look back at last year's rates and anticipate the increases to estimate rates for clients.  In general, older groups fared better than younger groups.

The key is to be proactive.  We are anxiously awaiting news from the insurance companies as to which other options might be available.  We already know the 2015 plans, but we will want to know the options if our group wishes to change to a January 1 renewal. 

So far, we are hearing that the groups will likely have the option of returning to their original renewal date.  There may be sound business reasons for doing so. For example, some groups are on a fiscal year and want their benefits to coincide. Others simply have too much going on at year end and prefer a different date.

The biggest reason to move to a January 1 date is that most of the plans run their deductibles and benefits on a calendar year basis. Changing plans in December often has a negative effect on employees.  If the employer increases deductible or coinsurance on the new plan, an employee who has already met the deductible or out of pocket maximum, must now satisfy the difference.

So the big question is "Will the carriers have that information for us before renewal?".  If not we may be forced to address the group renewals again for January 1.  These are the times I wish the carriers still had the Broker Advisory Council.

I had the privilege of serving on this council for Blue Shield of CA for several years.  It was our chance to give the executive team the reality of life "in the trenches" and let them know what issues our clients were facing.  We could give them input on the systems they were running and try to improve them.  We were also able to better understand the challenges the company faced.   To my knowledge these councils no longer exist.  It seems that if this was ever needed now is the time!