Early renewal options

Column 10--  Early renewal options

I am a small employer.  I have been told I should change my renewal date and renew my group early to avoid compliance with the ACA.  Should I do this?

It is important to consider all options as we face implementation of the new law.  Effective 1/1/2014 many new plan provisions including "essential benefits" must be included in your group plan.  In addition new taxes will be imposed to fund this new program. 

While final rates for small group plans and the Exchanges are not yet available, we are anticipating some changes that could make it beneficial to change your renewal date and extend transitional relief to your group.  This means that all of the provisions would not be implemented until your group plan anniversary following 1/1/2014.  So if you changed your renewal date to 12/1/2013, that would give you 11 months before your group would need to comply.

Following are some of the factors that you and your broker should consider.

·         Your groups current RAF (Risk Adjustment Factor):  In 2014 there will be no RAF's.  Everyone will pay the same rate based on census and geography.  If your group is at a 1.10, then a change to 1.0 with the new law would benefit you.  Conversely, if you group is at .90, you would be negatively impacted by a change to 1.0.

·         New rating factors:  The new rating tiers will now be used.  The maximum ratios is 3:1.  We expect that younger persons' rates will increase and older persons' rates will decrease.  If your group is primarily younger, then it could benefit you to lock in those lower rates for the next year.

·         When is your renewal date?  If it is September or later, perhaps you are better to wait it out and take the increases when they come.  In 6-9 months we should have a good handle on what the new plans and rates will be.  You will have enjoyed your current plan for that time and been able to watch all the bugs get worked out on someone else. 

·         The size of your group:  Husband/wife groups for unincorporated businesses will likely not work in 2014.  The expectation is that these groups were created because a member had a health problem and was unable to get insurance, so they used the group insurance guaranteed issue option. Since no one can be denied after 1/1/2014, this will no longer be necessary.

We are expecting all small group rates to increase in 2014.  Some plans could be as much as 40%.  Rates are typically available about 3 months in advance.  So by October 1, your broker should be able to run a comparison for you of the rates for December compared to January.   This will help you decide if it's to your benefit to make the change.  Also keep in mind deductibles that have been met and be sure to consider the effect on employees if you are to make any changes.  Typically the insurer will give credit for medical deductibles, but not always give credit for out of pocket maximums or Rx deductibles already met. 

At the same time, you will want to look at whether your employees are better off in the Exchange, rather than continuing your group plan.  As I have said before, small employers have a great deal to consider during the last quarter of this year.  There will not be a lot of time to do so with the crunch between when rates are available and when a decision must be made.  It's important to familiarize yourself with the options and try to understand them in advance. 

Just a reminder, the new taxes will be added to your premium effective 1/1/2014 regardless of your renewal date.  You will likely see this as a separate line item on your bill. 

 

Note: All information in this column is provided" to the best of my knowledge" subject to final regulation by the respective agencies.