The Jan. 1, 2014, implementation date of many insurance provisions and mandates under the Affordable Care Act (ACA) is rapidly approaching, leaving employers to wonder just how the ACA is going to impact them and their benefit offering.
“As employers explore their health insurance options for 2014 and receive renewal rates from their carriers, some may see an increase that is higher than what they may have expected,” says Marty Hauser, CEO of SummaCare, Inc. “This increase can be attributed to several factors mandated by the ACA. Employers should familiarize themselves with these changes so they understand the reason for premium costs and can decide what is best for their employees and business.”
Smart Business spoke to Hauser about the changes in rating and underwriting under the ACA that will impact premium costs next year.
What do insurers use to determine rates for employers and how will that change?
Currently, rating is based on a number of factors including age, gender, health status and geographic location. Preexisting medical conditions and prescription use are also used to determine rates.
In 2014, rating is limited to age, smoking status and geographic location. Guaranteed issue also goes into effect, meaning that insurers cannot deny coverage because of a preexisting condition or rate-up for high-risk groups. Simply put, insurers can rate a group based on fewer factors than in previous years.
What else is changing in rating that will impact premiums?
Age bands, which are ranges of ages that determine premium amounts, are used to determine a group’s rates, and today these are set at a 5-to-1 gender-based ratio.
Beginning in 2014, age bands can have a maximum ratio of 3-to-1, and these age bands are separated into three groupings: one single age band for children ages 0 through 20, one year age bands for adults ages 21 through 63, and one single age band for adults ages 64 and older.
It’s important for employers to understand that under the ACA these ratios are uniformly mandated and regulated across the country for each carrier in order to level the playing field when it comes to group insurance premiums.
In addition to the change in rating factors and age bands, the ACA requires certain fees and taxes from health insurance companies based on the insurer’s membership.
The first fee, called the patient centered outcomes research trust fund fee, went into effect last year at a cost of $1 per family member and increased to $2 per family member this year. The fee is collected to help fund the Patient-Centered Outcomes Research Institute, which will assist patients, clinicians, purchasers and policy-makers in making informed health decisions through research.
The second fee, called the transitional reinsurance program fee, is effective from 2014 through 2017 at a cost of $5.25 per family member per month or $63 per family member annually. This fee will be assessed against both insured and self-funded group health plans in order to stabilize premiums in the individual market for the first three years the marketplaces are in effect. These fees will be used to make payments to carriers that cover high-risk individuals in the individual market.
The third fee, called the marketplace user fee, goes into effect next year at a cost of 3.5 percent of policy costs. The marketplace user fee is meant to cover administrative costs of policies on the health insurance marketplace.
Finally, the annual health insurer industry fee begins next year at a cost of 2 to 2.5 percent, increasing to 3 to 4 percent in 2015. This fee is an excise tax to fund some of the provisions of the ACA.
In addition to the new fees, health plans are still subject to the 1.4 percent state premium tax.
How can employers offset some of the expense of their health insurance next year?
While there isn’t much employers can do about the new rating factors or fees imposed by the ACA, they can help offset their premium costs by working with their insurer or independent insurance agent to make sure they are offering the right coverage for their employees and budget. ●
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With the health insurance marketplace opening next month, the market is expected to be flooded with consumers trying to find a plan that works best for them and their budgets.
“The fact is people who have not previously had access to health insurance may be in shopping mode come Oct. 1 when the health insurance marketplace opens,” says Marty Hauser, CEO of SummaCare, Inc. “Our job as health insurers is to ensure employers and other consumers have access to the most accurate information available to them when it comes to choosing a carrier and a plan both on and off the marketplace.”
Smart Business spoke with Hauser about ways employers can assist employees shopping and applying for 2014 health insurance coverage on and off the marketplace.
What should employers that currently offer health insurance to their employees do when the marketplace opens?
Regardless of the company size, employers should communicate to employees if they will be offering employer-sponsored coverage next year and what type will be offered. Having this information will likely impact their employees’ decision on whether or not to shop for an individual plan on or off the marketplace.
Are companies required to offer insurance to their employees in 2014?
While there are tax incentives for small group employers — those with two to 24 employees — to offer their employees health insurance benefits next year, it’s not required under the Affordable Care Act (ACA).
Large group employers — those with 51 or more employees — however, are required to offer health insurance next year, but the penalty for not offering coverage has been delayed until 2015.
What can employers do if they are not offering insurance to employees next year?
If an employer chooses not to offer employer-sponsored coverage next year, they may want to consider a defined contribution health plan approach in which the employer decides how much to contribute to an employee’s health care expenses and the employees purchase health insurance on their own. Coverage can be purchased through the health insurance marketplace, direct from a health insurance company or through an individual insurance agent. Individuals can begin shopping Oct. 1 for plans effective Jan. 1, 2014.
How can employers not offering insurance help their employees get assistance in purchasing a health insurance policy?
Employers’ options include gathering and sharing information from their current insurer to share with employees, putting their employees in contact with a health insurance broker or making them aware of help offered by certified application counselors (CAC) and navigators.
It’s also important to remember that employers are required to notify their employees of the availability of the health insurance marketplace by Oct. 1.
What are CACs and Navigators?
CACs and navigators can assist individuals interested in enrolling through the marketplace, as both are trained to help with the application and enrollment process. Navigators receive grants for helping individuals and small employers shop and enroll in a health insurance plan, and they will conduct public education about the availability of qualified health plans, among other responsibilities. Navigators are held to detailed conflict of interest standards and eligibility requirements.
CACs are unpaid volunteers who typically work through organizations such as community health centers, social service organizations and hospitals. CACs are not subject to the same standards as navigators, but can still assist individuals.
Where can employers go to learn more?
Health insurers and/or insurance brokers can help guide employers in learning more about their insurance options for 2014 and beyond. In addition, information about the health insurance marketplace and other provisions and mandates under the ACA may be available through your insurer’s website. For additional information, visit www.healthcare.gov.
Marty Hauser is CEO of SummaCare, Inc. Reach him at email@example.com.
Insights Health Care is brought to you by SummaCare, Inc.