Early Renewal: Friend or Foe?
The ACA keeps rolling on, and if you’re an employer with 50 to 99 full-time equivalent employees, you’ll be subject to the employer mandate’s coverage requirement in 2016. But, that’s not the only change in store for you.
Prior to the ACA, each state had their own definition of what constituted a “small group” for insurance purposes. The ACA’s insurance reform provisions included, among other things, a uniform definition of small group, in order to facilitate proper operation of the Marketplaces. In 2016, a group with 99 or fewer employees will be considered a “small group.”
If you were a large group in 2015, but will be a small group in 2016, you need to be aware of a significant change that’s coming your way – community rating. In the small group market, the ACA requires individuals to be rated on their age and where they live, and carriers are going to change the way they bill for insurance coverage as a result. Where you’re familiar with a “tiered” rate for employees – one rate for single coverage, one rate for family, and maybe a tier or two in between – you’ll now get a bill with a separate charge for each employee. Additionally, because of the risk pool adjustment, you can expect to see an increase of premiums.
One answer to this will be to renew early in 2015, in order to keep your current rate structure for at least one and in some cases two additional years. This is definitely one option to consider. However, that move isn’t without consequences. For one thing, such a move will likely cause you to be subject to the coverage and affordability provisions of the employer mandate on January 1, 2016, not on your renewal date in 2016 (unless, of course, your renewal already was January 1, 2016, in which case, nothing will change with respect to the mandate). Also, if you’re using the lookback measurement period rules as most employers are, you’ll need to honor your old measurement and stability period, while implementing a new one going forward to match your new plan year.
Not to worry if you find yourself scratching your head right now. I just published an Early Renewal White Paper complete with a matching infographic that explains the process in detail.
Bottom line, now’s the time to start discussing 2016 plans with your insurance representative to ensure you’re equipped with all the information you need to make the right decision. Going with an early renewal and staying out of the community rating requirement is a smart strategy, but one that should not be implemented without proper planning.
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