In 2014, Massachusetts employers may see the effect of the Federal Affordable Care Act (ACA) on their health insurance premiums
For group health insurance plans with less than 50 eligible participants, renewing on or after January 1, 2014 there are several changes in rating factors (the mathematic formulas used by insurance carriers to calculate premiums) that Massachusetts insurance carriers must implement in order to be in compliance with the ACA. A recent study by consulting firm Oliver Wyman, commissioned by the MA Division of Insurance, came to the conclusion that 2014 ACA rating rules are projected to have a significant impact on certain Massachusetts small group health insurance plans.
Massachusetts currently (2013) allowed rating factors under 2007 M.G.L. c. 176J and 211 CMR:
- Ages of the covered members;
- Industry of the employer;
- Participation rate of employees in the employer’s health coverage;
- Participation in approved wellness programs; and
- Tobacco usage of the covered members.
- Value of benefits in a health product compared to other health products;
- Family composition (also known as rate basis type of the family5);
- Geographic location of business or individual policyholder’s residence;
- Size of the employer group;
- Use of an intermediary when obtaining coverage; and
- Use of a group purchasing cooperative when obtaining coverage.
Allowable ratings factors under the Feceral ACA, effective January 1, 2014:
- Family composition;
- Ages of the covered members (which may only vary within a 3-to-1 band for adults);
- Tobacco usage of the covered members (must provide wellness program to offset tobacco load for small employers); and
- Geographic location of the business or the individual policyholder’s residence.
Many of the 634,000 Massachusetts small employer health plan members will see reductions, but many will see premium increase shocks:
13% – Large Decreases: 83,000 small employer plan members will see 2014 premiums decrease by more than 10%; over 1,000 of those 83,000 members will see premiums decrease by over 30%.
58% – Smaller Changes: 370,000 small employer members will see 2014 premiums increase or decrease between 0% and 10%.
29% – Large Increases: 181,000 small employer members will see 2014 premiums increase by more than 10%; over 6,000 (slightly less than 1% of the small group market) of those 180,000 members will see their premiums increase by over 30%.
Waiver Denied by Department of Health and Human Services
At the direction of the State Legislature, Massachusetts Governor Deval Patrick sought a waiver from the ratings rules, but the Obama administration recently rejected it, allowing a three-year phase-in period instead.
Waugh Agency, LLC – trusted advice and solutions
Facing potential premium increases due to ratings factor changes, and with the additional taxes under the ACA coming in 2014, employers are looking for strategies to mitigate the finacial impact of the ACA. It is more critical now than ever before to have trusted advice and solutions for your company’s group health insurance. We will analyze your group health insurance needs and utilization to determine whether a traditional health plan, a Consumer Directed Health Plan, an employer self funded plan, or a combination strategy is the best use of your health care dollars. Please contact Waugh Agency, LLC for more information.