The Changing Landscape of Employer-provided Health Insurance

Callahan_Colleen_webBeing an insurance agent in this new world of health insurance requires frequent disclaimers. Agents routinely say to clients, “This is what we know today.” Writing an article in April that will be published in May is cause for alarm, mostly because it is impossible to know if the federal government will issue new guidelines or if Covered California will make changes.

The launch of Covered California was rocky; individuals and insurance agents experienced long wait times and the application process was slow and burdensome. The first open enrollment for individual plans has just ended and it is time to focus on the small group market.

Many parts of the Affordable Care Act (ACA) have been implemented in stages. Plans have added the preventive benefits, dependent coverage to age 26 and unlimited lifetime maximums.

The changes this year relate to plan design, networks, mandated benefits and how premiums are determined. It is important for employers and employees to be educated and prepared for these changes, because 2014 compliant plans will replace non-grandfathered plans at the annual renewal.

Small group is defined by the ACA as a business with 1-50 employees. There is no mandate that an employer in the small group market offer health insurance, but many do offer it as a way to attract employees and to remain competitive.

Those who took advantage of the option to renew coverage in December 2013 as a strategy to delay moving to 2014 compliant plans must be wondering what 2014 has in store for you! Here is a sneak peek.

Employers will need to provide more data to the agent who markets their plan. The new rating system for the premiums is called “member level.” That means that the agent needs to know the ages (dates of birth) for all people in the plan, including dependent spouses and children. Most likely, families will be surprised at the new premiums.

Plans are standardized and described by their metallic levels, Bronze, Silver, Gold and Platinum, which also relates to their actuarial value. The plans must cover 60, 70, 80 or 90 percent of the expected cost to the beneficiary. Plans must also include coverage for 10 essential health benefits.

Families with children under age 19 are required to have pediatric dental and vision as part of the coverage. Some insurance companies include a small fee for everyone; some add the premium just to those with dependent children under age 19. The family cannot opt out. Group coverage is available directly with insurance companies or with the Covered California exchange/marketplace called SHOP.

If an employer purchases coverage in the SHOP, they select one metallic plan. Employees do not have the choice to select a different level, but they do have the choice to select any participating insurance company within the same metallic level. Companies that qualify for the small business tax credit must purchase the coverage in the SHOP in order to obtain that credit.

If an employer secures coverage through a private exchange or directly with an insurance company, there is a little more flexibility. An employer could select a Gold level plan and an employee might have the option to “buy up” to a Platinum level plan.

Very small groups, partnerships or sole proprietors will be shocked to learn that they do not meet the requirements to qualify for group coverage.

This big surprise will be for groups that are defined as “owner only,” meaning there is not a W-2 employee participating in the plan.

Those groups will not be renewed, which means they will be cancelled and those owners will need to obtain coverage in the individual market. Unfortunately, moving from the group market to the individual market mid-year will mean a new deductible needs to be satisfied.

Another surprise is that employers will be forced to reduce their waiting periods. California no longer permits a 90-day waiting period in the fully insured market; it has been reduced to 60 days, which, in most circumstances, means the first of the month following 30 days of employment.

Of course, people will also be surprised to learn that many physician networks have shrunk. Some insurance companies are offering “skinny” networks as a method for controlling cost. Some doctors do not want to adjust (reduce) their contracted rates and some are saying they will not contract with any insurance companies or with Covered California.

The new taxes will be an added surprise. The insurance companies are required to collect additional taxes and forward them to the government to help pay for the PPACA. It is estimated that these taxes increase the premiums by nearly 5 percent.

It will be essential for employers to plan months in advance to make sure that the new compliant plan meets the needs of their employees. Although the plans are standardized, it is necessary to realize that it is not cookie cutter and it’s important to work with a professional agent to review the changes and all the available options.

Employees will need detailed education. Employers will evaluate which is best, the SHOP or direct with an insurance company. An agent, certified for both options, will be able to help with that analysis. Covered California has a “find an agent” tool on their website.

If some of these provisions are displeasing, it is not too late to contact your legislators, state and federal. Make your opinions and concerns known; ask them when the “affordable” part of the Affordable Care Act will be implemented!

Colleen Callahan, CLU, LUTCF, CASL, is the owner of Colleen Callahan Insurance Services. She can be reached at or (925) 363-5433.

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