Under the Affordable Care Act, the definition of a small group expanded to include an employer with 2-100 employees. However, the states could elect to wait until 2016 to change their definition of small employer from up to 50 employees to up to 100 employees.
With 2016 around the corners, small employers will need to plan for the future. Being classified as a small employer will cause affected employers to face additional ACA requirements such as covering Essential Health Benefits, metal-based plan designs, and cost sharing rules. Furthermore, the small group classification will also result in more restrictive rating rules. Grandfathered and self-funded plans, however, are excluded from this transition.
In large group employers could rate based on health status, historical group claims experience, industry, group size, and gender. Once these groups transition to small group the only rating variables that can be used to set premiums are limited to age (restricted to a 3-1 ratio between the oldest and youngest age rates), geography, tobacco use, and family size.
What does this mean? The 51-100 sized groups with younger, healthier populations will potentially see a significant increase in their premiums, while older or higher risk populations will likely lower their costs when they transition to small group.
The expansion of the small group definition under ACA will impact many employers, but there are strategies for your business to meet this ACA challenge. To explore some of these options contact you Heffernan Benefits Advisor today.
To contact a benefits advisor visit our benefit advisory services.
To learn more about Health Care Reform updates, visit healthcarereform-updates.com.