Early Renewal in 2013?

Many small employers that currently offer a fully-insured medical plan will be forced to adopt the new health reform regulations as of their plan’s renewal date in 2014. Because the majority of small businesses (at least the majority of our small business clients) expect health reform to increase costs, decrease benefit flexibility, and increase their administrative burdens, it may be advantageous to postpone the additional regulations for as long as possible.

That’s where the 2013 early renewal option comes into play. The early renewal option allows an employer to change their renewal date to a date late in 2013 (e.g. December 1, 2013) and then not be subject to the additional reform regulations until their plan renews in 2014 (e.g. December 1, 2014). Here’s an example:

Company ABC currently has a plan year that runs from January 1st to December 31st. If they renew as always on January 1, 2014, they will:

  • Likely see a significant rate increase (due to essential health benefits and modified community rating)
  • Need to change to a health reform compliant plan (deductible no higher than $2,000, include all 10 categories of essential health benefits, and have an actuarial value at one of the 4 metallic levels +/- 2%)
  • Likely deal with many legislative changes as these major health reform provisions are implemented for the first time and require “fixes”

If Company ABC decides to renew early on December 1, 2013, they will avoid these major changes for the first 11 months of 2014.

What you need to keep in mind is that each carrier has a different process and deadline for submitting a request to have an early renewal.  United Healthcare has the earliest deadline: requests must be received by 6/15/2013.

Also, some carriers, such as Humana, are providing estimated premiums for both 12/1/2013 and 1/1/2014 so that small businesses can make an educated decision as to which option will be best for them.  While the majority of small businesses are likely to benefit from an early renewal, it may not be the best option for all.  The businesses that are least likely to see a benefit are those with:

  • A predominantly older employee population
  • A predominantly female employee population
  • A significant number of health conditions
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SHOP Exchanges for Small Businesses Delayed One Year

Last Friday (March 8, 2013) the Obama Administration announced a proposed rule to delay the implementation of federally facilitated and partnership SHOP exchanges for one year.  The reasons cited for the delay are to address concerns about…

“…whether issuers could meet the deadlines for submission of small group market [qualified health plans] given the new small group market rating rules; whether issuers could complete enrollment and accounting system changes required to interact with the SHOP enrollment and premium aggregation systems required by employee choice; and whether there would be adequate time to educate employers, employees and brokers about the employer and employee choices available in the SHOP.”

What are SHOP Exchanges?

SHOP stands for Small Business Health Options Program.  SHOP exchanges are government run marketplaces that will offer a variety of health insurance coverage options (from private insurance carriers) to small businesses.  The two primary goals of SHOP exchanges are to:

  1. Reduce health insurance premiums for small businesses which typically see higher premiums and renewal increases than large employers
  2. Provide a wide range of benefit options for small business employees

SHOP Exchanges Will Not Aggregate Premiums for Small Employers

Last Friday’s proposed regulations also stated that federally facilitated and partnership exchanges will not aggregate premiums for employers.  Without aggregating premiums, employers may face significantly more administrative burdens if they choose to offer benefits through a SHOP exchange.  Assuming that this proposed rule becomes final, it is likely to have a significant impact on the success of the SHOP exchanges – especially given that many private exchange options are (or soon will be) available to small employers.

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