It is my understanding that the Affordable Care Act (ACA) forbids medical underwriting in the individual and group markets beginning in 2014. However, today, April 18, 2013, I attended a panel discussion of large group health insurance carriers , where representatives from Aetna, Anthem Blue Cross, CIGNA and Health Net all stated that they will continue to medically underwrite groups with 50 or more employees in 2014.
The Patient Protection and Affordable Care Act (ACA, Obamacare) reads as follows in Section 2705:
‘‘SEC. 2705. PROHIBITING DISCRIMINATION AGAINST INDIVIDUAL PARTICIPANTS AND BENEFICIARIES BASED ON HEALTH STATUS. ‘‘(a) IN GENERAL.—A group health plan and a health insurance issuer offering group or individual health insurance coverage may not establish rules for eligibility (including continued eligibility) of any individual to enroll under the terms of the plan or coverage based on any of the following health status-related factors in relation to the individual or a dependent of the individual:
- (1) Health status.
- (2) Medical condition (including both physical and mental illnesses).
- (3) Claims experience.
- (4) Receipt of health care.
- (5) Medical history.
- (6) Genetic information.
- (7) Evidence of insurability (including conditions arising out of acts of domestic violence).
- (8) Disability.
- (9) Any other health status-related factor determined appropriate by the Secretary.”
Note that the above text does not say “small group,” but “group” which applies to all employer groups.
The carrier reps at today’s presentation stated that the prohibition on medical underwriting only applies to small group (2-49 employees) and individual and family plans – not large groups (50+ employees.)
This makes no sense plus it is patently unfair.
Consider a large group that has employees who are pregnant, employees who have chronic illness and are generally unhealthy. Insurance companies will offer very high rates to these groups because of the poor health of the employees and dependents.
The large group carrier reps said that they cannot decline the business in 2014 but they can legally offer rates that are so high that it is effectively a declination. It seems to me that if medical underwriting is forbidden in the individual and small group markets that it should be forbidden in the large group market.
According to the panelists, brokers must submit the same sort of bid package that we currently submit which includes:
- current and renewal rates;
- the number of claims over $5,000 or $10,000 in the prior year;
- number of pregnant employees;
- number of employees or dependents on COBRA; and
- other census information such as age, dependent status and home zip code of employees.
One carrier rep said that the underwriting guidelines will be more extensive in 2014 than they are currently. He characterized them as a “thick binder” of underwriting rules.
In my opinion, the existing process for obtaining quotes for large employers (51+) is extremely unfair to employers. For example, an insurance company demands to know the existing rates that an employer is paying for its current coverage and the renewal rates offered by the incumbent carrier.
I cannot name another industry where one must disclose the current price paid for a service before a vendor will bid. Of course the rates offered by competing carriers are very similar to the current rates. In fact, many insurance companies have internal rules that forbid them from lowering the rates more than 10% below the current or renewal rates.
Imagine that you want to build a building and you ask 3 contractors to bid on your project yet all of them require that you to tell them the bid price of your current contractor before they will offer their proposal. You would be at a very big disadvantage. This is the case when seeking bids for large group health insurance.
Smaller sized large groups (under 200 employees) can see their rates dramatically impacted by a single large claim. I have had clients whose renewal rates have increased by 30% because of a single major claim.
The ACA should set a level playing field so that all market sectors play by the same rules.