Many employers are bracing for higher health care costs in 2016, but a change in how the “small group” market is defined may mean even greater hikes.
Under the Affordable Care Act, the definition of a small group employer will expand as of Jan. 1 from firms with up to 50 employees to firms with up to 100 employees.
The change will push some 2,000 Long Island businesses with 50 to 99 employees into the new category, according to U.S. Census figures.
“These mid-sized employers will now be “community rated” by insurers, meaning their health insurance plans will be pooled together with those of other companies for premium rating purposes. Experts say small-group status will give companies less plan flexibility and doesn’t take into account factors such as employee age that might affect rates.
“It’s a pooled rate,” explains Mark Grisanti, vice president and senior benefits consultant at Corporate Synergies, a Mount Laurel, New Jersey, employee benefits consulting firm.
The rates are filed with the state and are the same for each employer in a given county that falls under the small-group threshold, he notes. Not considered under community rating are such factors as an individual company’s industry, average employee age or gender makeup, he explains.
So for example, firms with largely older employees could benefit, while firms with a younger workforce may not.
Pooled rates cut both ways. “I have clients on both sides,” says Grisanti, noting the small-group market generally offers reduced plan options and less robust provider networks than the large group market. “From what I’ve seen, most of my clients are going to see premium increases.”
Recent federal legislation gave states the option to keep the small-group threshold at less than 50, says Kathleen Brennan, president of 360 Insurance Services, a Bohemia corporate benefits consulting firm. But state officials have opted to accept the expanded definition, she notes.
Matt Anderson, a spokesman for the New York State Department of Financial- Services, which oversees the insurance industry, confirmed that: “Current state law requires the change to 100 for the threshold.”
“There’s definitely trepidation in the marketplace,” says Brennan, who spoke of the changes at a recent HIA-LI Health and Wellness Conference. Under small-group rules, firms also wouldn’t be able to self-insure, she notes.
Some opt to renew early.
To deal with the changes, some firms are renewing before their renewal dates, says Christine Ippolito, Principal at Compass Workforce Solutions, a Deer Park human resources consulting firm, and a moderator a the wellness conference.
“If my renewal is Jan. 1, I may do it Dec. 1,” she notes, adding many carriers are providing this flexibility. It buys firms another year before they’re lumped into the small-group market.
Not every employer will experience higher rates, she notes. “The issue with community rating is it can go either way,” she says. “Regardless of your group [makeup], everyone pays the same.”
For the 90-person law firm of Picciano & Scahill in Westbury, a Compass client, a switch to community rating will likely mean higher premiums in September come renewal, managing partner Frank Scahill says. “They don’t take into account the demographics of your firm,” he notes, adding 75 percent of his firm’s employees are younger than 50. “I think it’s going to cost mid-sized companies more.”
Other firms are looking into options including health savings accounts, health reimbursement arrangements and joining a larger Professional Employer Organization to take advantage of economies of scale, Grisanti says.
Fast Fact: 64% Percentage of workers at mid-sized firms that would experience premium increases of 18 percent as a result of expanding the “small group” category to businesses with up to 100 employees.