New health care reform deadlines are nearing. While some schools are well prepared, others are still scrambling to understand how the changes will impact them. It’s true, the changes will effect schools somewhat differently than they will effect large companies. These differences are not clearly outlined on available government documents. If you’re not keeping up with latest news or don’t have a broker on top of the evolving definitions of what is considered full time and part time in the education world, you could be lost.
The good news—employer penalties have been delayed until 2015. The PPACA is going into full effect January 1, 2014, but essentially you have a year to get caught up before penalties begin. More good news—with this, a number of carriers are offering early renewals for company health plans. How is this good news you wonder. Let’s take a closer look.
What is an “early renewal” and should you consider it?
CareFirst, UnitedHealth, Humana, and Aetna (among others) are all expected to offer early renewals. This means offering you a 12/1/2013 early renewal versus waiting until your “normal” 1st quarter 2014 renewal date.
Why are carriers doing this, and what are the “pros & cons”?
Under the Affordable Care Act, policies that take effect on January 1, 2014, must reflect new regulations including:
- Guaranteed availability: No one can be denied health insurance because they have or had an illness.
- Health insurance premiums: Premiums can only vary based on age, tobacco use, family size, and geography.
- Guaranteed renewability: Health insurers cannot refuse to renew coverage because of illness.
- Single risk pool: Health insurers cannot charge higher premiums to higher-cost employees by moving them into separate risk pools.
These policies are popular with many health clients as well as the public in general, but are less popular with Insurance companies as they can effectively lower profit margins. By renewing in 2013 rather than 2014, employers may, for now, be able to avoid these regulations.
It’s important to note that some State Departments of Insurance have prohibited this practice, while others have encouraged it. You’ll need to check with your broker or research your state's allowances to determine if your school is eligible for early renewal.
For example, the Illinois Department of Insurance recently warned health insurers it wouldn't approve policies with "arbitrary" renewal dates meant to "delay compliance with the reforms."
Pros & Cons for renewing your policy early
“Pros”
- The general “wisdom” is that individual premiums, on average, will increase 25% to 40% due to PPACA.
- A study by Milliman showed Health insurance premiums, on average, could rise by as much as 40% under the Patient Protection and Affordable Care Act. The study focused on premiums for individual and group comprehensive medical insurance plans in Arizona, Florida, Illinois, New Jersey, Ohio, and Wisconsin.
- Compared to this forecast, the guess is that early renewals will reflect increases of from 6%–15%.
- Finally, it has also been voiced by carriers that they will likely be modifying (reducing) the level of coverage for the more robust plans. So if you’re currently providing one of those, by renewing early, you can maintain the current level of coverage for your faculty and staff.
“Cons”
- While renewing early has the potential to save a small employer a significant amount of money for a portion of the year (assuming the predictions are correct), we have not yet seen carriers provide the actual rate should you wait for your normal renewal date. This is likely due to the fact that these rates have not yet been approved by their respective state insurance departments. So, while the general wisdom is that by renewing early you will save money, you will not know that for certain as there is no comparative point.
Other possible Cons (consequences both intended and unintended) include:
- Plan documents may need to be amended.
- Deductibles/co-pays reset; 60 days advance notice to the carrier may be required to meet SBC requirements.
- There may also be issues with resetting your flexible spending plan year (cafeteria plan) to align with the new health plan contract year.
- If you use employment contracts and reference is made to either the school’s or the employees’ contributions to health care (especially if dollars amounts are indicated), these may be impacted and need to be modified—if you can.
- In summary, renewing early may be beneficial for some schools, but not others. So each school needs to, along with their broker, analyze to determine if renewing early is the best way to go.
Looking for an employee benefit plan that fits your school’s mission and unique budget? ISM builds custom packages for schools of all shapes and sizes. And, we’re not just an insurance firm. We partner with all of our clients to offer them renowned theory supported by nearly four decades of research working with private-independent schools, as well as excellent coverages to protect students and those who protect their students. It’s our 3600 Risk Management approach!
Additional ISM articles of interest
ISM Monthly Update for Business Managers Vol. 11 No. 9 Preparing for the Health Care Reform Changes
Private School News Vol. 11 No. 4 Health Care Reform 2013-2014
Private School News Vol. 11 No. 5 10 Major Concerns for Health Care Reform After Supreme Court Ruling
Private School News Vol. 11 No. 5 Health Care Reform and the Effect on Health Flexible Spending Accounts and Health Reimbursement Arrangements
Additional ISM articles of interest for Gold Consortium Members
I&P Vol. 35 No. 7 Health Care Reform: What Schools Need to Know Now
