Early 2014 large group renewals have come in for fully-insured and self-insured plans. Many employers are going to have an unpleasant surprise. A surprise to many who have had the belief that the postponement of the mandate postponed everything. Are you ready for this?
Example 1: A colleague of mine reports a 400 life group with a 77% loss ratio received an 8.5% increase, but it was actually a 21% increase. – How could this be? Answer: ACA fees are 4.00%, reinsurance fee $5.40 pmpm and insurer fee of 2.5%; no surprise, this was expected. Here is the surprise; 7.5% benefit adjustment added on top of the premium for the benefits to become ACA compliant – meaning all medical and RX expenses now apply to the maximum out-of-pocket limit. ACA by itself accounts for an 11% increase. My colleague’s client knew the benefit adjustment was coming but was expecting it next year since pay or play was pushed back. – Without Obamacare the increase was 8.5%. With Obamacare the renewal increase is 21%!
Example2: A self-funded plan with 531 enrolled has done well managing costs with no increase to health insurance premiums in 2013 or deductible changes. They report beating the national averages in all but one of the last 6 years. The additional reinsurance fees, taxes, etc. alone will add over $131,000 dollars to their plan. The group has a cost sharing arrangement with their employee that includes the premium, deductible, and coinsurance. The cost share will equal $85,000; and will need to be passed on in addition to any cost trend. That is $160 on each enrolled associate, before cost trend.
In announcing the postponement, the IRS took pain to note that only the employer shared responsibility mandate was postponed, everything else would become effective in accordance with the law’s requirements.
Let us know what you are experiencing.