Andy Pascarella Employee Benefits Consultant & Sales Practice Leader View Bio

Due to consequences of the Affordable Care Act, effective on January 1st, 2016, experience-rated and self-funded companies will be forced back into the small group community-rated pooled insurance rates for their employee benefits.

As of today, for self-funded companies between 51 and 100 employees, the law states that they can no longer purchase stop-loss insurance. New York Assemblyman Senator Kevin A. Cahill has introduced pending legislation to propose changes to the Workers’ Compensation Fee Schedule and allow the re-introduction of stop-loss insurance to be purchased.

While there is no idea when this bill will be voted upon, if something does not change before 2016, companies should begin determining the financial consequences of these changes, which could trigger significant premium rate fluctuations.

What is the difference?
Community Rating – In a community rated pool, insurers calculate the cost of health insurance premiums based on the insurer’s community demographics and claims experience without adjusting for the group’s age, gender, family composition or claims experience.

Experience Rating – In an experience rated pool, insurers calculate the cost of health insurance premiums for an employer based on several factors including demographics, SIC code and past claims experience. With experience rating, the insurer calculates the group’s insurance based on its own – not the overall community’s – claims experience.

Experience-rated companies with these favorable demographics: a lower average age of employees, a close to a median ratio of male to female employees, favorable SIC codes and good claims experience could be significantly impacted by having to move back into a community-rated insurance pool.

What Are The Next Steps?

  • Speak with your health insurance broker to determine how this change will affect your organization. The impact will not only be financial, but would affect your employee’s health benefits levels through potential increased co-pays, deductibles and prescription (Rx) drug costs.
  • If your company is self-funded, it a game of wait and see until 2016, but we recommend being prepared to understand all of the ramifications and options you have with these changes.

To talk with one of our health insurance benefits consultants, contact us here to discuss how this may affect you.

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