Last week the Los Angeles Times reported that large employers estimate that the cost of group health insurance will increase about 5% in 2015. I was quoted in the last two paragraphs of the article, talking about the 2015 rate increases for California small businesses. We’ve seen rates increase from a few percent to twenty percent depending on the characteristics of the employees.
While there are winners and losers among California employers; we have been able to change our clients to different insurance companies and different plans so that in most cases they won’t have any increase and many of our clients will pay less for group health insurance in 2015 than they did in 2014.
Without making any changes, the winners seem to be small groups with the following characteristics:
- they already offer rich benefits (e.g., $250 deductible PPO plans with $2-3,000 out of pocket limits),
- have older employees,
- have few or no dependents, and
- have higher than average rates (i.e., small groups with a 1.10 Risk Adjustment Factor).
These companies are able to change to a new plan and save money.
On the other hand, the losers seem to be:
- groups that pared back benefits in 2013 (i.e., high deductible);
- have younger employees;
- included coverage for dependent spouses and children; and
- may have had a low rate (0.90 RAF) under a pre-ACA plan.
Many of these groups took advantage of the “R.A.F. Special” that insurance companies offered in 2013. Consequently they had low rates going into 2014. Now, the RAF system is gone – it has been replaced by a single rate for each insured person. Pre-ACA rates were based on an age range (e.g., 30-39 years old) for the employee and a composite rate for dependents. Now, ACA rates are based on the specific age of each employee, spouse, and child. This results in much higher family rates than in 2013.
One bit of relief for employers facing large rate increases is the “grandmother” option. It allows small companies to keep their 2013 plan for another year. The grandmother rates increase slightly for many groups to double digits for others. As I said in the LA Times article, this allows business owners to “kick the can down the road and see what next year holds.”