New rating factors for businesses, as well as individuals and families, will play a key part in planning for 2014. Some businesses will be smacked with a 50+ percent increase based on some characteristics that are at play with the new rating rules. With that said, some businesses will be excited to know their premiums are slated to lower. There are some key items you need to know that go into the new rating model called Community Rating.
There are a lot of questions that come up regarding the healthcare law. Some think it will be for free. In some cases, it will be pretty close to free. Others will find out real soon when their premiums change, they may possibly go down, but for the most part they will go up due to changes in the Affordable Care Act.
Rates can vary based on if the plan covers an individual or a family. Health Insurance companies must utilize a per member rating process. The insurance company adds up the rate for each family member to arrive at the family premium. Rates for only the three oldest family members under age 21 will be taken into account in addition to the rates for those over 21.
A State may establish up to seven rating areas under the proposed ruling. The rating areas must meet one of the following: 1) There are no more than seven areas based on county, three-digit ZIP codes or metropolitan/non-metropolitan statistical areas. 2) There is only one area in the state.
Rates can vary based on age. They cannot vary more than 3 to 1 for adults. The rule establishes a uniform age bands. A child age band: A single age band from 0-20. An Adult age bands: One year age band stating at age 21 to 63. Lastly, a single age band for 64 and older.
Tobacco users were not left out of the equation. Insurance carriers can charge higher rates for people who use tobacco products. They are also limited on what they can charge. Rates for people who use tobacco products cannot vary by more than 1.5 times the rate of the non-tobacco user.
The premiums could have a toll one way or the other come 2014, depending on the variables in the census of the employer group and the new rating rules. The business may or may not have control on the ratings, however, you can start planning your strategy for 2014 and beyond. Making some adjustments now could off-set costs come next year. If you do not do anything, or the current agent or broker does not do anything, you could be suffering with the 50 + percent increase putting a huge burden on the cash-flow of the business. Cash-flow is so crucial for the survival of a business.
Butch Zemar
www.EliteBenefits.net