New, ACA compliant health care products for small business reflect additional coverage and changes in the way health insurance is rated
Michigan small businesses have begun to hear from their health insurance carriers that they will need to enroll in a health plan that is “compliant with the Affordable Care Act” as part of their plan renewal in 2014.
Compliance requires significant changes in how health insurance has been traditionally rated – and in the level of benefits provided – and there are impacts on the prices traditionally paid by businesses for coverage. The bulk of small businesses covered by Blue Cross will land in the mid-range of premium increases, meaning that their premium will increase an average of 8 to 10%. But these are averages, after all. About 25% of small businesses will see a flat or premium decrease while on the opposite end others will experience much higher increases.
Why are there so many variances in this new pricing?
A host of factors are impacting premiums, making it difficult to gauge the impact to an individual business unless you know how these factors play into the cost of their new coverage. Each year health care prices increase.
But in 2014 other factors related to new regulation will come into play:
- Health plans will cover more benefits as a standardized package (picture a base model car that is now offered with new standard features). The new plans all must cover essential benefits like prescription drugs, durable medical equipment and outpatient mental health. The new premiums reflect this broader and richer coverage.
- New ceilings on deductibles will impact business whose employees had plans with deductibles of $5,000 or higher.
- Before the ACA, certain industries received a discount if the industry as a whole had comparatively lower health care costs. This “industry factor” has been removed meaning businesses in some industries will no longer get a discount due to a history of lower health care costs.
- The rating factor for age also has changed. The formula is complex but essentially younger workers will receive less of a discount and older workers will get a greater discount than before. This impacts – both on the upside and downside – the overall premium cost for a business.
- Previously, premiums were rated as one-person, two-person or family. Now each person on a health insurance contract will receive their own rate up to a cap. A premium for a larger family with older children could see an increase while two-person premiums could see a decrease.
- Premiums will be based on health care costs in 16 geographical rating areas defined by the state instead of the nine rating areas that Blue Cross currently uses.
- New premium taxes also begin in 2014.
So what should a small business do when assessing its new plan options? Reach out to their insurance agents who have received training on the new requirements to discuss options. Online resources are also available such has healthcarereformbasics.com or www.bcbsm.com.