By Jim Wisdom
The fourth quarter of 2015 promises to be one of the busiest and most challenging quarters in the history of the group health insurance industry.
The reason for the change is the next phase of implementation for the Affordable Care Act. Employers who want to stay ahead of this enormous shift will have to start paying attention now.
Here’s a brief summary of some of the key changes that will impact small employer groups as we head toward the end of the year. To make things even more complicated, the definition of a small employer group, currently 1-50 employees, will change to 1-100 employees next year.
• Requirements to move: All small employer groups will be required to move to ACA-compliant health plans prior to Jan. 1. And, about 75 percent of all small employer groups have renewal dates in the fourth quarter. The vast majority of those have a renewal date of Dec. 1. Virtually all employers in the small employer group market will be marketing their group health coverage in the fourth quarter, and industry estimates indicate 50 percent or more of small employers will switch health insurers in 2015.
• Rate Impact: For those employers who have not already transitioned to ACA-compliant plans, they are likely to experience higher than normal rate adjustments in moving to the new platform. The main reasons for this additional rate adjustment include: transition to the 10 new categories of minimum benefits; ongoing ACA taxes and fees; new ACA rating methodology; and four new tiers of plans – platinum, gold, silver and bronze.
• Compliance: Employers will be required to provide reports to the IRS under Section 6055 ( applies to all employers), as well as 6056, 1094 and 1095, which are due for all groups over 50 employees in early 2016 for the 2015 calendar year.
• Employer Shared Responsibility Payment: This penalty, which applies to employer groups with greater than 100 FTEs, will also be phased in for employer groups with 51-100 employees under the transition relief provisions of the ACA.
• Employer Shared Responsibility Payment for more than 50 FTEs: Beginning with calendar year 2015, employers who have 50 or more FTEs that do not offer health coverage to at least 70 percent of their full-time employees (and dependent children) that is affordable and provides minimum value will be subject to penalties if any full-time employee receives a government subsidy for health coverage through a health care exchange such as Covered California. Some transition relief is available, especially for employers with non-calendar year plans.
• Preliminary rate outlook: Health insurers are just beginning to release their anticipated rate actions for 2016, and these requested premium increases are generally higher than anticipated. Clare Krusing, a spokeswoman for America’s Health Plans, an industry group, described the position of many health insurers in a recent Wall Street Journal article: “This year, health plans have a full year of claims data to understand the (health insurance) exchange population, and these enrollees are generally older and managing multiple chronic conditions. Premiums reflect the rising cost of providing care to individuals and families, and the explosion in prescription and specialty drug prices is a significant factor.”
There is an old saying in the group health insurance business: “Claims are claims.”
Or, stated differently, a health insurer needs to charge enough premium dollars to cover the next policy year of projected claims. If health insurers don’t charge enough in the coming policy year, then they will have to charge even more in a subsequent year to pay for additional health care claims.
In summary, employers would be well advised to start shopping for group health plans as early as possible. This is particularly true for employers who provide somewhat customized benefits plans.
Jim Wisdom, CFP, owns an insurance and financial services consulting firm in Westlake Village. Reach him at [email protected]