Should Small Group Employers Renew Their Group Health Plans Early — in Dec. 2013 — ahead of ACA?

NOTE: This article applies to Small Group Employers with 50 or fewer employees.

(Please note that some of the information presented here are subject to change. Many of the ACA (Affordable Care Act) regulations and California Exchange rules are still being decided, clarified or modified by the regulators, and the carriers.)

Most Small Group Insurance Carriers are offering their members the opportunity to renew early on Dec. 1st, 2013, ahead of ACA implementation. If they wish to do so, they must submit Early Renew forms by certain deadlines.

Basically, for groups with renewal months between Jan. and June 2014, carriers have been offering a lower than normal renewal rate increase. They are doing this for business retention purposes, so that groups will not leave them en masse.

Whether you renew or not, there will be an increase of between 2% to 3.8% on Jan. 1st which is a pass-through of fees and taxes mandated by ACA to pay for the expenses of setting up the Exchanges. This is over and above any other increase.

Following are some of the reasons why a group would want to renew early. You can lock in your current plan design and known rate increase until Dec. of 2014. Most carriers have not released their 2014 rates and increases yet. But the following are possible reasons for you to renew early in order to be protected against these adverse effects until Dec. 2014.

1) If your current RAF (Risk Adjustment Factor) is less than 1.10, your group may suffer under the new ACA rules. RAF’s will go away. All groups will be rated the same regardless of risk. Healthy groups with low RAF’s will see their rates go up.
2) New ACA-compliant rules may change plan designs that may cause plans to become more pricey.
3) With ACA-mandated community-rating, premium differences due to age, which were at a 1:9 ratio (of young vs. old), will be compressed to 1:3, which means that companies with a large proportion of young employees will see significant increases in premium.
4) Premiums for families with children will go up because they will be assessing premium for each dependent child within a family up to 3, as long as they are 18 or under. (Children over 18 will be counted as adults in pricing.)

If you renew early, in Dec. 2013, then these changes will be postponed until Dec. 2014.

Since circumstances for everyone differ, if you need help on your specific situation please call Phil Lee, Lee Insurance Services at 800-286-7445.

Phil Lee

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