As ACA Exchanges Open, Insurance Rate Changes Loom
Employers throughout Central Massachusetts might find fewer workers on their health insurance rolls come 2014, while smaller firms could be in for a shock when they see the price tags for renewing coverage.
Those are two of the biggest changes businesses will face once key facets of President Obama's Affordable Care Act (ACA) are implemented, according to local healthcare experts.
“This is a new way of doing things,” said Kristen Lepore, vice president of government affairs for Associated Industries of Massachusetts. “Time is going to tell how well this is going to play out.”
Health insurance exchanges opened nationwide Oct. 1. They allow individuals and companies with less than 50 workers to compare policies and premiums. The individual mandate — a requirement that all Americans acquire health insurance or pay a penalty — is set to take effect Jan. 1.
But implementation of the employer mandate — which penalizes companies with more than 50 full-time workers that fail to offer affordable health coverage — has been pushed back to Jan. 1, 2015.
Big changes will accompany the shift from the Massachusetts state-run connector, in effect since 2006, to an exchange operating under ACA rules.
All workers can purchase plans through the exchange starting in 2014, including workers whose employers offer coverage, Lepore said. Workers weren't allowed to access the Massachusetts connector as long as their employer picked up at least one-third of the company plan, said Audrey Gasteier, deputy director of policy and research at The Health Connector.
Employers will be presenting insurers with a different demographic pool should they have workers opt for the exchange rather than company coverage, Lepore said. The exchange will prove most tempting to individuals making less than $46,000 a year, since they would qualify for a subsidy, said George Gonser, CEO of Spring Consulting Group, which is based in Boston.
Better For Younger Workers?
Young employees would often fall into a lower salary bracket, Gonser said, and would have less qualms about signing up for a plan with higher out-of-pocket costs since they typically require less medical attention. Should companies have young workers depart for the exchange, Lepore said firms would likely receive higher coverage quotes from insurers.
But Gonser urged younger workers to employ an apples-to-apples comparison — factoring in the loss of an employer contribution toward health insurance premiums — before they decide whether to opt-out of a company plan.
“People will have to be very, very careful about what they jump into,” he said.
Companies with less than 50 employees will also have their insurance rates calculated differently beginning next year. Gone will be rating factors like industry type, said Patrick Farrell, regulatory affairs director at Fallon Community Health Plan in Worcester.
Insurers can now consider just four factors in determining the price of coverage, Farrell said: age, geography, contract type and tobacco use.
The transition to the new rating factors will be phased-in over three years, Gasteier said, meaning the old rating factors can be applied at two-thirds their original value in 2014 and one-third their initial value in 2015.
Still, Gonser is telling clients to prepare for an 8- to 14-percent shift in premiums next year. The very fortunate or unfortunate could see swings of as much as 20 percent either way, said Jack Myers, vice president at Worcester-based Benefits Development Group.
Impact On Smallest Firms
Who will be the winners and losers?
Insurers currently offer discounts to firms with more employers, Lepore said, so individuals and sole proprietors will likely benefit from the rating reforms, while companies with 10 to 49 workers will likely face higher premiums.
The elimination of industry type will likely benefit higher-risk blue-collar occupations at the expense of lower-risk white-collar professions, Gonser said.
With fewer factors at play, Farrell expects remaining items — notably average age of workforce — to be weighed far more heavily.
“For the employer, the anxiety will be, 'What's my price going to look like come January?'” Myers said. Companies should be receiving 2014 price quotes by early November.
Companies expected to suffer from the rating factor revisions can stave off the changes for a year, Myers said, by switching the effective date on their insurance policies from January to December. That would allow them to renew one more time under more favorable conditions, Myers said.
But most small firms use the calendar year, Myers said, meaning companies that switch would have to deal with the logistical headache of having their health insurance plans operate on a different cycle than their fiscal year.
The rating factor adjustments will accompany a 1.9-percent jump in the base insurance rate for all small employers, Gasteier said. The amount of money to be collected based on the application of rating factors, though, will remain unchanged in 2014.
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