Kilpatrick

Carrier News

Alert: Small Group will Stay 2-50 in Texas

Yesterday, President Obama signed the PACE Act into law. The law permanently establishes the definition of a small employer as an employer with up to 50 employees and gives states the power to modify the definition. Texas will retain its small group definition—employers who employed an average of 2 to 50 employees in the preceding calendar year. Under ACA, the scope of the small group market was set to expand to include employers with up to 100 employees on Jan 1, 2016. The timing of the change presents a few technical and administrative challenges in the group markets. HHS issued transition guidance through FAQs on Oct 19.

Mid-Market (51-100) Quoting

Send us your 51-100 quote requests as soon as possible. We expect significant processing delays among our carriers for a few reasons. Last year we learned that carriers may stop accepting new 1/1 submissions in early December.

  • Our health insurers intentionally withheld most 2016 renewal offers and quotes for employers with 51-100 in anticipation of this bill being enacted. Carriers are backlogged and will scramble to release those proposals in the coming weeks.
  • New groups with 50-99 employees will enter the market for 1/1/2016. Many (but not all) of these employers qualified for a conditional exemption from Employer Mandate penalties in 2015. The exemption does not apply in 2016.

If you submitted a quote request for a 51-100 segment group without providing underwriting data—e.g.: claims, contributions, etc—you need to update those requests.

Carrier Product Expectations

BCBS will begin releasing 1/1 renewals and quotes for 51-100 groups this month. The plans will mirror their 100-150 segment portfolio. BCBS will implement various uniform benefit changes for plans effective beginning 1/1. Be careful with 12/1 quotes as they will not be a valid indicator of 1/1 plan options and rates.

Humana will use the same fully insured and level funded plan designs they current offer. Actuary will need time to develop pricing for 2016 before they can release fully insured quotes. In the interim, Humana will quote level funded options. Expect extreme processing delays.

Memorial Hermann made a few modifications to their 2016 large group portfolio—they added a few plans and removed a few plans. But they did not modify the benefits among their existing plans.

UHC will use the same fully insured plans they currently offer. The portfolio will be a little smaller as a few plans will no longer comply with federal out-of-pocket maximum rules in 2016—some aggregate deductible HSA-compatible plans. They will begin releasing renewals and quotes immediately.

Broad Implications of the PACE Act

Carriers were required to file their 2016 rates in May 2015. At that time, they assumed that small group would expand to include employers with 51-100 employees, which would lower the overall risk of their respective pools. According to the HHS Oct 19 FAQ, small group carriers in TX can revise their 2016 rate filings effective 4/1/2016. We expect carriers to apply above average trend increases to their Q2 rates this year.

Carriers will continue to experience rate mid-market (51-100) groups. This is good news for the majority of large groups whose rates are lower than the small group community rates and bad news for employers with poor experience or case characteristics.

An employer’s size for MLR, risk corridors, and risk adjustment purposes will follow Texas’s small group definition (up to 50 ATNE). See question 4 in the HHS Oct 19 FAQ. Until now, Texas defined small group as up to 100 ATNE for MLR purposes. Due to this change, Texas carriers will be required to meet a 85% minimum loss ratio for groups with 51+ ATNE, which will cause carriers to run leaner in both market segments than they are currently. Meeting the MLR requirements in both segments will be more difficult this year.

Earlier this year, carriers surveyed employers to determine the market segment each employer would be treated in going forward. Carriers will have to rollback these changes. This may cause renewal underwriting delays and possibly broker commission errors among groups that were affected.

Under the assumption that small group would expand in 2016, many 51-100 segment employers took advantage of carrier initiatives to change their anniversary dates to 10/1 in order to maximize the time they could stay on existing plans under transitional relief. UHC will work with employers who wish to rescind these elections, but we do not expect all carriers to do so. Please contact our office if you need us to request consideration on a group.

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