This is the time when groups of 50-100 employees are facing real challenges as they face benefit compliance issues and deadlines.
As part of the ACA (Affordable Care Act, aka Obamacare) groups of under 100 employees are now in the “small group” market for fully insured plans. Most employers don’t understand the difference and what options they have to circumvent some of these differences.
Probably the most annoying feature of small group products is the way the plans are rated. Rather than a composite rate for each tier of enrollment, small group plans are age rated. So each individual is rated based on their respective age, rather than all single employees being charged the same rate. Dependents are rated in the same fashion. This creates challenges for payroll departments and budgeting and forecasting costs.
However, there are positives to being in the small group market. The most important is guaranteed issue. That means the insurance company may not refuse to cover your group, regardless of the number of pregnancies, or high cost claims. The rate structure is essentially the same for all groups in the geographic area for the same plans.
Further, the companies have relaxed participation requirements, in many cases down to 25% of the group. So if an employer with under 100 employees can only insure 25 of the eligible employees they will not be rejected. In the past, 70- 75 of those employee would need to be covered.
Large group has enjoyed the following advantages over small group:
Rate negotiation: The group has the ability to negotiate rates with the carrier. This is typically the function of the broker/consultant who understands the market forces that will be effective tools in negotiation. Longer term rates can be an option. Small group rates are fixed.
The ability to customize benefits: While small group plans are essentially limited to “off the shelf” product, large groups can choose to customize their plans deductibles and copays and even some of the benefit provisions.
Dedicated account management teams: This is an important asset for large groups as the account managers are familiar with the specific group and the employer is not bounced around between the random CSR answering the 800 number.
Partial Self-Funding: Total Self-funding is reserved for the largest of groups. But groups in the 50+ range can enjoy some of the cash flow and benefit concessions in the partial self-funding market.
In partial self-funding arrangements the employer is charged against their claims accounts for claims up to a specific deductible amount for each individual. Typically this can be $15,000 to $50,000 per individual.
The employer also purchases aggregate stop loss insurance. This means that a factor (aggregate attachment point) is assigned and the group knows they are not responsible for any claims over this assigned limit, regardless of the number of individual claims that meet the specific stop loss threshold.
In partial self-funding the employer typically pays a level premium based on expected paid claims or maybe even at the higher aggregate limit. Then at the end of the calculation or run-off period, the employer is either refunded the excess premium, pays an additional charge, or if they had funded at the limit, then there is simply no refund.
One of the biggest benefits to the employer in self-funding is to understand how the population is actually using the health plan. The plan can be tailored to meet the employees’ needs, but also designed to discourage wasteful usage. Further, self-funded plans are free from some of the legislated burdens of fully insured plans.
Of course there is always more risk with a partially self-funded plan, particularly for groups of over 100. If they wish to return to the fully insured market and have had poor loss ratios, they may be charged a much higher premium, or carriers may simply refuse to quote. This risk is inherent in all large group situations.
Because underwriting is completed during the RFP (Request For Proposal) phase and in fact some stop loss carriers will require health statements from each employee, the process can be rather lengthy and uncertain.
Business owners understand that there positives and negatives with any changes. The trick is understanding how to make the most of those changes for your particular situation. With proper advice and guidance, employers can find a way to comply with the new laws and continue to provide valuable employee benefits to attract and retain good employees.