There were various changes to community rating that came about due to the passage of the Affordable Care Act (ACA). These changes for employers with under 50 employees went into force in 2014. The only way for an employer to avoid these changes is based upon temporary statue passed by the President via transitional relief that allows certain employers to keep their plan through the anniversary date of 2016. Again, this is only temporary relief.
The changes due to ACA are as follows:
- Uni-sex rate (males and females will now be charged the same rates)
- Age-Banding can only occur within a 3:1 ratio. This is a significant change from the prior 7:1 ratio.
- No industry code discrimination.
- Can apply tobacco surcharge of 50%, although most insurance carriers seem to only be implementing a 20% surcharge thus far.
- No underwriting discretion to appropriately reflect the true rise of the group:
- Groups with historically high claims benefit from these new lower rates.
- Health groups without such history of high claims are penalized by the new rating rules.
- Small groups actively managing their employee population health risks are impacted as long as they remain full insured.
- ‘Large Group’ moves to 100+ employees in every state effective in 2016.
- ‘Small Group’ becomes 2-99 employees in every state effective in 2016. This means that these new ACA rating rules will apply.
- Healthier groups are expecting to see a dramatic rise in premiums as the new ACA rules do not apply individual characteristics to groups to appropriately reflect true risk.
