On July 7, 2014 Governor Brown signed SB 1446 into law. This legislation will have a significant impact on the health insurance options for many small businesses in California. Estimates are that up to 80 percent of small businesses in California “early renewed” their group health insurance plan in December 2013. By doing the early renewal, employers with fewer than 50 employees were able to keep their existing health insurance plan for an additional 12 months and postpone the transition to the new Affordable Care Act (ACA, Obama Care) plans.
The new law, SB 1446, will allow small businesses to keep their 2013 health insurance plan until December 2015. Renewing a 2013 plan in 2014 is called “grandmothering.” Many small businesses would face significant rate increases with the new 2014, ACA compliant plans without the grand mother option. The new law delays the significant changes in benefits and rates caused by the ACA.
Still, the insurance companies will increase their rates, or premiums, for the grandmothered 2013 plans in 2014. Small group employers must wait to see the size of the increase for their health insurance plan and compare that to the benefits and rates for the ACA compliant 2014 plans. Recall that the 2013 plans use the Risk Adjustment Factor (RAF), and medical underwriting – aspects of health insurance that do not exist with the ACA compliant plans.
Most employee benefit advisors, such as BenefitsCafe.com, estimate that the insurance companies will increase the rates for the 2013 plans by 12-15%, or about one percent per month. Some companies may raise their rates more. Blue Shield of California has not increased their small group rates since July 2013, nearly 18 months from December 2014. Likely they will make up for the lag in rate increases by giving a hefty rate increase to the 2013 plans.
Also, recall that many small businesses took advantage of the “RAF Specials” that insurance companies offered in 2013. It may be that these were groups with high utilization which would cause the rates to rise even more than the increases from medical inflation. So, the good news is that small businesses can keep their 2013 health plan until December 2015. The not so good news is that the rates will likely rise for these plans. Small businesses need an advisor such as BenefitsCafe.com to help determine which set of plans is better the renewed 2013 grand mother plans or an ACA compliant 2014 plan. Give us a call at 800-746-0045 and we can help you out.