Yesterday, the House of Representatives voted to pass the “Protecting Affordable Coverage for Employees Act,” a three-page bill designed to preserve the current definition of small group as one with 50 or fewer employees so that mid-sized companies with 51 to 100 employees will not have to play by the small group rules starting in 2016. The bill now moves on to the Senate, where its passage is uncertain.
This bill had a lot of support on both sides of the aisle and passed the House with a simple voice vote. The National Association of Health Underwriters, which encouraged its members to contact their elected officials about the bill, will now shift its attention to getting it passed in the Senate.
The bill that passed the House yesterday would give states the option to expand the definition of small group to include companies up to 100 employees: “nothing in this section shall prevent a State from applying this subsection by treating as a small employer, with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year.” However, states have had this option for the past two years and none chose to expand the definition.
The reason for the opposition to the expanded definition of small group is because, starting next year, mid-sized employers will be required to cover all essential health benefits and be subject to the modified adjusted community rating rules if the bill fails to pass the Senate. The temporary transitional relief for small employers would permit these companies to postpone the impact one more year by renewing their current plan, but most agents agree that the new rules, when they apply, would significantly increase premiums for medium-sized groups and cause some employers to drop coverage altogether, a trend we’re already seeing among smaller employers.
Companies with 50 or fewer employees that have moved into an ACA-compliant plan are already subject to the new rating rules, and many are having trouble maintaining their group health coverage. Agents have found creative ways around the rules for some of their clients—staying grandfathered, taking advantage of the transitional relief, or moving to a self-funded plan despite the small group size—but some small employers have decided it’s not worth the trouble and have made the tough decision to drop their group plan altogether, a trend that many expect to continue. Rising premiums, of course, are part of the reason for this trend, but the fact that some employees and their families, especially those who would qualify for a premium tax credit, would do better purchasing coverage in the individual market is another big reason for companies to consider dissolving their employer-sponsored plan. Those that maintain the group coverage block families from receiving any government assistance.
Some agents have even developed a strategy of helping small employers and their employees through this process. They visit with the employer, run the numbers, and if it makes sense to cancel the group plan, they help the employees get individual coverage by directing them to the agent’s private exchange site. This helps brokers spend their time consulting with employers and educating employees on a group basis rather than sitting down with each employee one-on-one, which would be impractical for agents who are trying to maximize their sales. A private exchange site can also be helpful when approaching employers that don’t currently offer health benefits. While some companies are struggling with the decision about maintaining or dropping coverage, the fact is that most small employers don’t offer group health insurance, and their employees are great prospects for agents who sell individual policies.
The open enrollment period in the individual market starts in one month. If you don’t yet have your private exchange site, there’s still time, but you need to take action today.