One of this fall’s “hot topics” highlighted in this month’s AHCP newsletter, was the definition of small group for purposes of the plan design and rating rules and how it varies and may change. One such change is that brought about by the Affordable Care Act. Starting in 2016, companies with 100 or fewer employees will be considered small employers and be subject to the essential benefits requirement and the modified adjusted community rating rules. Currently, every state sets the cutoff at 50 employees, rather than 100.
For the past two years under the ACA, states have actually had the option to decide where the cutoff falls; no states have elected to change the definition to 100 employees. That all would have changed during the company’s 2016 renewal period.
However, as mentioned in our previous article, there is a bipartisan bill that would preserve the current definition of small group. That bill actually passed the House of Representatives on September 28th and the Senate on October 1st, and that’s great news for agents who work with mid-sized employers.
Called the “Protecting Affordable Coverage for Employees Act,” H.R. 1624 allows states to decide what the cutoff point between large group and small group will be. The bill will now be sent to President Obama for his signatures.
Different Definitions of Small Group
It’s important to keep in mind that the definition of small group for purposes of the market rules—the definition that H.R. 1624 sought to address—is different from the definition of “small group” for purposes of the employer mandate. Under the employer shared responsibility requirement, companies with 50 or more full-time equivalent employees are required to offer health insurance to their employees or face a tax penalty; companies with 49 or fewer are not.
What does this mean to brokers?
Most brokers with small group clients don’t need to be told what this means or how important this bill is; they already know. If you work with this market segment, you probably helped some of your clients switch their effective dates to December 1st back in 2013 to postpone the new small group requirements as long as possible. Then, in 2014, you probably helped them avoid the new rules a little longer by renewing their current plan under the transitional relief option, if available in your state. And you’ve probably looked into self-funding and other options to help these small employers avoid the modified adjusted community rating rules altogether when the transition relief ends.
Now, bigger companies, those with 51 to 100 employees, would be in need of those same strategies if this bill hadn’t passed, and they might still need to consider those options in states that may still choose to expand the definition of small group. Since we’re already so close to January 1st, it’s unclear if every state will leave the cutoff point at 50 employees or if some will proceed with the change. We should know soon though.
If the definition of small group does change in your state, some of your clients will need to make some plan changes that could be unpopular in order to keep premiums reasonable, changes such as increasing the deductible, increasing the out-of-pocket limit, dropping doctor and prescription copays and more. If they go that route, you may want to remind them that they’re leaving their employees with more exposure than they’re used to and some education may be necessary.
Finally, remember that voluntary products are a great way to fill some of the gaps in the new health coverage and reduce the employees’ exposure to medical claims; don’t forget to mention these products when you’re making your health plan recommendations. If you haven’t sold voluntary in a while (or at all), AHCP can help get you up to speed on the various options and how to sell them. Contact AHCP Agency Services today at (877) 228-8773 or by email.