The major changes with Health Reform will be enacted on January 1, 2014 which will create change for small and large group employers. While small groups are not mandated to offer coverage (There is not an inadequate or unaffordable coverage penalty for small groups) they will still see changes. Health plan renewals for 2014 will be increased 30% to 50% over the normal renewal making it very difficult for many employers to offer coverage. The individual and small group (Called Shops) exchanges will also be available. Ultimately, small groups will have five options for health care offerings in 2014. All five options are reviewed in depth below.
Note: Plan renewals prior to 1-1-14 will not be loaded with the additional premium created by Health Reform. Only renewals or groups with a 1-1-14 date or later will have the additional premium load.
Note: Voluntary benefit offerings have grown in popularity and will become even more important with the changes of health reform. More information is provided below on why employers should have a voluntary offering for employees.
- Renew current plan or renew with benefit changes after 1-1-14- Groups that want to keep their current plan or renew the same plan with benefit changes may do so. The big problem will be with the renewal rate. Health reform imposes a number of new taxes and fees on insurers. It also changes all health insurance to guaranteed issue. (Individual plans are not guaranteed issue currently) In order to compensate, insurance companies will be loading small group health plans with additional premium. Estimates vary but it is generally understood that increases will be 30% to 50% on top of the current renewal. In other words, if a group was going to have a 12% renewal on 1-1-14, they are likely going to have a renewal in the range of 42 to 62%. Many employers will not be able to continue with their standard plan as a result.
- Renew current plan or renew with benefit changes prior to 1-1-14- Many companies and brokers are using this strategy which involves renewing a group early (12-1-13) in order to avoid the extra rate load. They will have a normal renewal and the plan will carry over until 12-1-14 at which time they will be assessed the additional rate load on the renewal. This strategy is a way for groups to delay the inevitable for 12 months.
- Alternate funding methods (Starmark or Assurity)- Alt funding arrangements are under utilized and will be a viable solution for many small groups. Starmark and Assurity specialize in small group self funding. While the name implies that the groups is responsible for claims, it is not the case. The insurance company pays the claims but they determine the annual rates of the group based on their claims experience. Groups with a relatively healthy population can use this approach to obtain much lower rates than that available through normal funding arrangements. The other benefit is that alternate funding arrangements are not subject to most of the increased cost load of health reform which will keep renewals reasonable in 2014.
- Buy coverage through the SHOP exchange 1-1-14 or later Small groups will be able to enroll in a plan through the SHOP exchange in Connecticut for 1-1-14. There is little information available about the Shop exchange however. Rates, plan designs and participating companies have not been announced (As of June 1, 2013). The SHOP exchange was touted as having multiple plan offerings from various insurance companies however it now is being speculated that there may only be one or two choices. Small groups purchasing insurance through the SHOP will be eligible for up to a 50% premium tax credit in 2014. For more details on the premium credit click the link Health Reform for Small Groups Connecticut
- Drop coverage and have employees buy through the Exchange – The Connecticut Exchange is now up and running with rates available for individuals and families. The exchange plans are offered on a guaranteed basis which makes it an option for group employees. Some employers may decide to stop offering coverage and simply have employees buy plans on the exchange. One challenge with this strategy is that employees earning $50,000 or more will not be eligible for any type of premium subsidy and will pay substantially higher premiums than someone of the same age making $35,000 a year. For employers using this option, it would be advisable to use an HRA arrangement in order to provide value to the employees. HRA accounts can be funded by the employer (employer determines amount) so that the employees can use the funds to help off set the monthly cost of the Exchange plans. A voluntary benefit offering would also be recommended in this situation.
Once the SHOP plans and rates become available in CT, there will be a clear set of choices for small group employers in Connecticut. It will be important to plan a strategy well in advance of 1-1-14. Voluntary benefits will become a key offering for small group employers in 2014. With the standardization of health benefits, voluntary offerings will be a free value add for employers to offer.