Group Benefits Update: Will Small Employer Reclassification Cost You a Small Fortune?

group-benefits

In January 2016, size will matter … all over again. Just as employers are finally getting clear on their roles and responsibilities under the Affordable Care Act, and how to calculate their FTEs, another curve ball is coming their way. Beginning with January 1, 2016 health plan renewals, the definition for “small employer” under the Affordable Care Act will change to include groups of up to 100 employees. Previously, the small employers included groups of up to 50 employees in all states.

At first glance, you might assume this is a good thing, but in fact, it is expected to wreak havoc for employers in the 51 to 100 employee size group. According to NAHU, 90 percent of employers in this group presently offer health insurance. Thirty percent of employees in the 1-100 size classification are employed by 51-100 employers according to the American Academy of Actuaries.

 What can these 51-100 groups expect to see in 2016? 

  • They will move from the mid-market to the small group market.
  • Some employers may no longer be able to access their existing health plans because their insurers do not participate in the small group market for their states.
  • They will also move from composite rates for health insurance to the new ACA age band rating. As a result, NAHU projects that two-thirds of plan beneficiaries in the 51-99 employee groups will face premium increases averaging 18 percent in 2016.
  • These employers will face more restrictive rating rules and will no longer receive discounts based on their actual claims experience.
  • With the above considerations in mind, self-funding may be become a more viable option for the 51-100 employers – especially for those with healthy populations.

Small Group Expansion bill to be fast tracked.

In March, Senators Jeanne Shaheen (D-NH) and Tim Scott (R-SC) introduced legislation S.1099 to help states manage the small group expansion. The proposed legislation would eliminate the national standardization of the definition of small groups. Instead of being required to comply with the single national standard under the PPACA, states would have the flexibility for determining their own small group sizes as they currently do. The ACA already allows for states to make the transition ahead of the January 2016 required transition date, but not a single state has opted for this early transition.

On August 6, the legislation was put up for consideration for hotlining (a process used to pass a bill by unanimous consent) when the Senate returns from its recess on September 8.

Many employer groups are urging repeal of the ACA’s small group expansion and are supporting legislation to keep the existing small group definition of up to 50 employees. The U.S. Chamber of Commerce and 17 trade associations have also requested an immediate delay of the reclassification.

Make your voice heard!

Of course, we at BeaconPath are advocating for a delay in the group expansion implementation and increased state control over group size classifications. Please join us by reaching out to your state senators and members of Congress.

Want to stay up to date on health care issues? Subscribe to the BeaconPath blog in the top right corner of this page. Also check out our other update on this topic:  Pace Act Gets the Green Light.

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