In 2016, the Affordable Care Act will expand the small group health insurance market (currently groups with 1-50 employees) to include groups with 51-100 employees. This expansion is intended to make health insurance more affordable for the smallest companies by expanding the risk pool to include larger companies.
For those groups with 51-100 employees that are already providing health insurance in the large group market, this move to the small group market will change how their rates are set due to more restrictive rating rules, including:
- Member-level rates for each individual covered, including adult children
- Rates determined only by an employee’s age and region, not by a group’s history with an insurance carrier
- Compression of the rate differential to a maximum of 3:1 between the oldest and youngest age brackets
- No favorable rates for being in a low-risk industry
- No negotiation of rates
Groups with 51-100 employees will also face additional benefit and cost-sharing requirements (the inclusion of Essential Health Benefits and lower annual out-of-pocket limits), which could result in fewer plan design choices and higher premiums. Also, provider networks are smaller and prescription benefits are not as rich in the small group market.
These changes are predicted to impact the rates of groups with 51-100 employees anywhere from 15% to 40% at their 2016 renewal.
Most health insurance carriers are making special offers to groups with 51-100 employees, giving them the opportunity to take early renewal and/or extend their contracts to delay the move to the small group market until the end of 2016. While this strategy may not be a fit for every group, it should be considered. These special offers may create significant savings and groups who qualify should have their brokers do a thorough analysis now, because election deadlines are approaching.