Early Renewal for Health Insurance Explained

Health Insurance Early Renewal ExplainedIn January 2014, changes from the Affordable Care Act will impact small group employers that offer health insurance to employees. Employers can expect to see a variety of changes that will affect rate calculations, coverage levels, out-of-pocket maximums, waiting periods and much more. Some of these changes are outlined below.

All small businesses are required to comply with these requirements beginning when your plan renews in 2014. Since the full impact of these changes is not yet clear, we are recommending that our clients renew their policies early changes your open enrollment date of December 1st 2013. Currently all carriers are allowing you to renew your plan early to stay with your current plan as long as possible.

Waiting Period

With the passage of AB 1083 California mandates that all new business will be subject to a maximum 60-day waiting period. In 2014, there will only be three waiting period options:

  • First of the month following the date of hire
  • First of the month following 30 days of employment
  • Sixty days from the date of hire. (NOTE: Carriers must be willing to prorate their plans for this option. At this time, some carrier will offer this option while others will not.)

Community Rating

Health care reform will change the way insurance premiums are calculated. Risk adjustment factors (RAFs) will be eliminated and medical history will no longer have an impact on rates. Instead small groups will be subject to Community Rating , which is based solely on the following in California:

  • Age. Employee-based premiums will be removed. The rate will be determined by the age of each person enrolled. There are 45 age rates under the new system.
  • Employee Zip Code. Instead of employer-based rating, rates will be determined based on where the employee lives. This could make it difficult to determine the correct rate for each employee. There will be 19 different rating areas.
  • Family Status. Families will be charged for up to three dependent children when calculating the premium.

Here is our blog article – Community Rating Explained

Essential Health Benefits

Carriers will revise their small group plan portfolios to comply with the “Essential Health Benefits ” mandate, requiring small business health insurance plans inside and outside of the exchanges to cover a uniform set of products and services.

Here is our blog article – Essential Health Benefits Provides Same Coverage Across California Health Plans

Metallic Level Plans

Carriers will offer four different metallic level plans as follows:

  • Bronze: 60 percent actuarial value
  • Silver: 70 percent actuarial value
  • Gold: 80 percent actuarial value
  • Platinum: 90 percent actuarial value

Deductibles and Out-of-Pocket Maximums

The maximum deductible for small group plans will be limited to $2000 per individual and $4000 per family.

Annual out-of-pocket maximums will be limited to $6,350 per individual and $12,700 per family. These are the same maximums that apply to high-deductible health plans (HDHPs) and Health Savings Accounts (HSAs).

For 2015 and beyond, out-of-pocket maximum will be adjusted based on increases in the average per capita premium for health insurance coverage. They will not be linked to the out-of-pocket maximums for HDHPs/HSAs.

Group Coverage vs. Exchange

Employees will not be eligible for a subsidy through the Exchange if:

  • They are offered a group plan with a minimum actuarial value of 60 percent (Bronze Level Plan or better) AND
  • They are not required to contribute more than 9.5 percent of their W-2 wages for employee-only coverage

Safe Harbor Rule vs. Household Income

Because employers may not be able to determine an employee’s household income, the IRS has created Safe Harbor tests for determining whether an employer is offering “Affordable Coverage.” The Safe Harbor provision allows employers to base affordability on an employee’s W -2 wages. However, eligibility for subsidies through the Exchange will depend on household income.

Here is our Blog article – Explaining Affordable Health Coverage

Group Exchange vs. Private Marketplace

Covered California is developing a marketplace for small businesses with one to 50 eligible employees. There will be a significant network difference between the plans offered through the group Exchange and the private small group marketplace.

However, the development of the small business Exchange is still in the early stages. It will take time for us to evaluate its impact. At this time, we believe it’s best to stay in the current system for as long as possible. That means renewing your policy early, to be able to postpone these changes as long as possible. If it looks like moving to a plan from the Exchange will benefit your business, we can make the change for you.