Healthcare Coverage Renewing “As Is” Under the Affordable Care Act
By: Robert Pusateri, Capstone Brokerage Benefits Consultant, May 15, 2014
The days of renewing your health insurance plan “As Is” are coming to an end. At one point many of my clients often would say “We like what we have, we can absorb the cost increase, let’s just save us the headache of switching and renew as is.” With the passing of the Affordable Care Act renewing “As Is” is becoming a thing of the past.
Many small businesses (under 50 employees) are now being forced to change their healthcare coverage but don’t really understand why. Change can be challenging to explain to employees causing frustration to employers.
In order for many businesses to be able to afford providing healthcare coverage to their employees they are forced to make changes to the insurance coverage itself. Changes can be made to deductibles, copays, provider networks, and/or rate structures that can reduce employers cost. Many times this means higher deductibles, lower prescription coverage and higher co-pays, essentially passing the burden of increased cost onto the employees.
One of the biggest burdens of cost may be due to the way groups are now rated. Prior to the passing of the ACA, group rates were based on medical underwriting. A company would then have a composite breakdown for the company. Composite systems are based on 4 tier’s, employee only, employee plus spouse, employee plus child(ren), and family. Now rates are solely based on age, tobacco usage and geographic location. Under the ACA each family or employee will have their own rate because it is based only on the ages of those individuals including all dependents. A family of four once would have paid a specific “family rate” company wide. Now, depending on age one family of four may pay less then another receiving the same benefits. Every situation is so unique providing a cost breakdown to employers to share with their employees is now more complex.
The largest increase in cost may fall on plans that had prescription generic- only coverage, these plans are now non-compliant under the ACA. We are seeing increases as high as 87% for clients who once had this type of plan design. Another large increase in cost from the ACA are to those groups who have older demographics. Although they may be healthy they will be paying higher premiums based solely on their age compared to the old composite system. This major change to how a rate is determined makes renewing “As Is” almost impossible.
Although renewing “As Is” may be a thing of the past it doesn’t mean that renewing your companies health coverage has to be difficult. ACA compliance is the law and a necessity for businesses now and in the future. Perhaps many businesses feel it is just as important to provide affordable coverage. A knowledgeable broker can find ways to offer ACA compliant coverage that is affordable for all parties.
