Short-Term Health Insurance: A New, More Affordable Option

/in , /by

Updated October 5, 2018.

Purchasing individual health insurance comes with many pressures. Those seeking coverage are often strapped with additional stressors such as loss of a job, loss of employer coverage, divorce, or other strains that negatively affect financial well being, leading to increased physical and emotional health risks. Many confusing questions go through a buyer’s mind: “Can I afford it?” “Does it cover my needs?” “I just don’t understand my buying options.”

Consumer studies have indicated that as a population, we are becoming better about making health care decisions. This may be because we have a greater stake in the game, higher premiums, higher deductibles, smaller networks, and fewer options. Though most of us receive health insurance benefits from our employers, there are still many who fall outside that category:

  • Individuals who cannot afford COBRA
  • Self-employed individuals that do not qualify for subsidies on Affordable Care Act (ACA) plans
  • Employees of smaller companies not providing coverage and part-time or seasonal workers
  • Students and/or children turning 26 and aging out of parents’ plans
  • Those between jobs or in their employer’s waiting period
  • Early retirees or spouses
  • Moving to a new state
  • Those whose providers are not “in-network”
  • Those going through a divorce
  • Those earning too much for Medicaid or too little/too much for government subsidies

A more affordable option for these circumstances may be short-term health insurance. In 2017, the average short-term premium was just $79 per month for a 30 year old. Also in 2017, individual medical plan rates rose at a national average of 21 percent. Short-term plans may fill a temporary gap in coverage and provide a more cost-effective option for those in these situations.

In October of 2017, President Trump signed an executive order directing federal agencies to draft regulations aimed at rolling back the former short-term medical restrictions. On February 20, 2018, Health and Human Services proposed the new rules and the final rule was issued on August 1, 2018. These new laws take place on October 2, 2018, but may be limited by final State rulings.

New federal regulations now allow up to 364-day short-term health insurance plans with the option to renew for up to 36 months. Many states have proposed their own limits to these federal regulations. Ohio and Kentucky, for example, allow up to 360 days, while Indiana allows up to 184 days and Kansas and Montana only up to 123 days. Each state has adopted varying levels on what they will allow and many states have yet to propose their own limits. This will be a state-by-state approach and it is important to understand the guidance and regulations based upon the state in which you reside. Individual plan buyers who are unable or unwilling to buy ACA compliant plans may soon be able to purchase longer-term plans with greater duration of coverage. Considering tax penalties will no longer be enforced for 2019, short-term plans are a viable option.

Short-term plans also offer financial advantages for brokers. These plans are not just an open enrollment period sale like the distant relatives in ACA. You can sell and receive commissions year round.

Be aware: These plans are not required to comply with the ACA, include the use of underwriting (pre-existing conditions are not covered and applicants may be declined), may not cover certain medical expenses, and may impose annual/lifetime maximums/limits. Additionally, termination of a short-term plan will not trigger a special enrollment period in the individual market and today short-term plans are not considered minimum essential coverage under ACA.

Many short-term plans come with additional perks and benefits such as wellness, telemedicine, etc.

Helping people during difficult times or transitions in their lives is a win-win situation. Providing options for those who formerly have had very limited choices is much appreciated by those in need. If you are looking for solutions and your clients fall into these categories, call Cornerstone today. We have several options to assist you in finding affordable solutions for your clients.

You Have a Lot to Offer! Increasing Revenue with Ancillary Sales

/in , , /by

As consumers, we are presented with ancillary options every day. Coffee shops supplement coffee revenue by selling travel mugs and snack foods. Airlines offer in-flight services for purchase, from food and beverages to movies and internet connection. Package delivery services add income by having readily available packing materials like boxes, bubble wrap, and tape in their storefronts.

Add-on products or ancillary sales can account for as much as twenty percent of additional business revenue.

However, ancillary insurance product sales are a largely disregarded opportunity. Whether it’s complacency or contentment with a medical sale and the occasional dental and vision add-on, by not demonstrating the benefits of ancillary coverage, you may be doing a disservice to both yourself and to your client.

Take the time to discuss the benefits of dental, vision, and hearing plans that are designed to meet everyday needs and budgets. Understand your client’s medical history and present options like critical illness plans and cancer policies. For older clients, consider information about hospital indemnity plans and final expense coverage. Be ready to compare traditional individual medical with short-term plan options in the right situations and the value of securing a good accident plan. Consumers like choices and ancillary insurance give them options to fill in gaps that they may not even know exist in their coverage.

The average consumer thinks about their insurance coverage once a year and, typically, they automatically renew coverage if circumstances have not changed. Bringing ancillary products to the table at client meetings is the perfect opportunity to let them know about any auxiliary lines of coverage you represent in addition to your main line of business. Share your value with the client to open the door for higher retention, increased referrals, and more reasons for regular client contact throughout the year.

Connect with your Cornerstone representative if you’re interested in learning more about how to sell or become appointed to sell ancillary products.

What’s Old is New Again: Recycling in the Individual Market

/in , /by

The title of one of my favorite movies, Back to the Future, seems apropos when compared to today’s individual health insurance market. With the Affordable Care Act (ACA) being anything but affordable, many consumers are looking for alternative options to cover themselves and their families. Monthly ACA insurance premiums can cost more than an average mortgage payment so other options have to rise up from the grave to give consumers access to “affordable” health insurance.

Before ACA, we had medical underwriting, we had prescreens, we had limited coverage for maternity, and we had waiting periods on pre-ex. These are many of the reasons the ACA was created—to eliminate screening questions that were seen as unfair to a consumer with medical conditions. Granted, pre-ACA coverage was not the best either, but it was a fraction of the cost of current ACA coverage. Pre-ACA, networks were also much more extensive, with the majority of options today consisting of very limited HMO or EPO choices.

On April 2, 2018, the great state of Iowa made national news in their attempt to create Individual association-style plan offerings. The Iowa Farm Bureau is looking to recreate coverage options that consumers had before the ACA. However, according to a recent Washington Post article, such plans “sponsored by a nonprofit agricultural organization…shall be deemed not to be insurance.” Rates and coverage options have not yet been approved, but it is difficult to believe that there will not be some limitations that will make these plans available only to those on the healthier end of the spectrum.

The Back to the Future opportunity is twofold. On one hand, short-term plans are beginning to resemble pre-ACA coverage. If the laws change and allow short-term back to a nearly annual, renewable contract, this market will explode for the young, invincible, and healthy population.

However, there are tradeoffs with coverage options. Most short-term plans have PPO networks, which are significantly larger than what can be found with ACA plans. On the flip side, the coverage on the short-term plans is not as extensive as one might find in the ACA. Benefits are not as rich from a copay or medication standpoint and short-term plans do not usually cover maternity, which can be an issue for younger families. Anyone with medical conditions or significant health care needs may not qualify for short-term plan offerings, while ACA plans are guarantee issue.

Let’s look at a couple illustrations that show sample price comparisons for 21, 43, and 64-year-old non-smokers with short-term versus ACA options, using Franklin County (Columbus, OH) as the test case. These are the lowest prices available in which the out-of-pocket costs are closely aligned.

Short Term*

ACA**

Age

Premium

21

$      84.73

$      355.47

43

$     106.16

$      482.38

64

$     284.53

$    1,066.41
*$2500 Deductible, 20% Co-Insurance, $7500 MOOP
**$2400 Deductible, 20% Co-Insurance, $7350 MOOP

A 21-year-old “invincible” can purchase a middle-of-the-road short-term plan for less than their monthly cell phone bill. A similar plan offering in the ACA would compare more closely to their monthly rent or car payment. The ACA plans are averaging four times more costly than short-term coverage options in nearly all age ranges. When you annualize the premium savings for a 64-year-old consumer, you see savings of over $9,000. For those on a fixed or limited income, this is necessary money in their pocket.

When looking at sample family rates of 35, 33, 6, and 4 year olds, the price difference is even more dramatic. ACA rates, without a subsidy, are approaching, and possibly even exceeding, what a family of four would pay for their monthly mortgage and escrow payment. The rate is almost five times more expensive for ACA versus short term.

Short Term*

ACA**

Age

Premium

35, 33, 6, 4

$    333.00

$        1,592.04
*$4000 Family Deductible, 20% Co-Insurance, $12,000 Family MOOP
**$4000 Family Deductible, 20% Co-Insurance, $14,700 Family MOOP

With all things being equal, it is difficult to pass up the significant monthly savings of $1,259 dollars for the family of four. Annualized savings amount to more than $15,000.

With short-term medical and association-style options potentially becoming en vogue again, one has to wonder what will become of the ACA. With many national carriers having exited the Marketplace in a majority of states, and many states with only one or two carrier options, it appears the death spiral for ACA is in full effect. Limited competition creates higher rates; higher rates drive the healthy population into alternative options. When the healthy leave the Marketplace, all that remains are those with medical conditions or those who are receiving a substantial subsidy that offsets the majority of their ACA premium.

Consumers will make health care decisions based on how it impacts them the most: their pocket book. If they can qualify medically and achieve premium savings like what is outlined in the above illustrations, more and more will flock to short-term or association-style options, like those being proposed in Iowa and potentially other states in the near future.

Like the late, great Yankee’s catcher Yogi Berra once said, “It’s like deja vu all over again.”

Questions about short-term plans? Contact your Cornerstone representative today to learn more.

Set Yourself Apart with Level-Funded Health Plans

/in , /by

It’s about that time again. Another fourth quarter is right around the corner and your clients may be quite tired of the same old story: Another increase, another change in benefits, another quoting season, and the expectation of bad news. What if you could provide hope, grow your book of business, and add unique value to help your small business clients save money all at the same time? The implementation of the Affordable Care Act (ACA) has been both challenging and confusing for many employers. ACA community rating has benefited a few traditionally “less healthy” groups, however the rating methodology, compliance hurdles, and cost (at least in Ohio) have kept most groups in steadily shrinking transitional plans.

As in any challenging situation, creative minds rise to the occasion. In this case, newer-to-market level-funded health plans are an intriguing alternative to ACA plans for small businesses.

Level-funded products are designed to give clients the benefits and advantages of self-funding, while limiting the disadvantages by offering a “pre-packaged” hybrid of self-insurance for small employers (down to five enrolled locally). Historically, small businesses did not have the opportunity to self-insure their health coverage. Healthy groups continued to absorb increases of the pools of business, which became sicker over time. Today, many commercial carriers are offering level-funded plans that curtail claim volatility through fixed monthly premiums with the added bonus of a potential refund if claim costs are less than expected. These plans allow the small business to see the financial benefits that self-funded plans traditionally offered only to large groups.

So, why consider level-funded plans?

  • Premium payments are predictable and fixed monthly, avoiding volatility in monthly cash flows and risk of claims exceeding the monthly payments. Employers pay fixed premiums to cover claims funding, stop-loss premium, and administrative fees. Employers are not responsible for claims exceeding those fixed payments for those received during the 48 months following the end of the first year.
  • When is the last time you were able to tell your small group client they may be eligible for a refund? That’s right, a refund. Most level-funded plans refund a portion of the unused claims surplus at the end of the year, dependent upon the plan’s experience. After a three- to six-month run out period, the client’s performance is evaluated and a portion of allotted claims dollars may be returned if they have run below maximum claim expectations (most carriers require that you renew with them to receive this reimbursement). The refund can be used to offset future increases.
  • Level-funded plans are exempt from state taxes on premiums (usually 2–3 percent of the total premium). In this case, only stop loss premiums are taxed. They are also exempt from the ACA’s Health Insurance Tax. The ACA does require all self-funded plans to pay an annual PCORI fee ($2.39 for 2019) and they are required to comply with ACA reporting requirements like an Applicable Large Employer.
  • Level-funded plans use medical underwriting and gender/age ratings, allowing healthier workforces to pay lower premiums. Community rating—required by ACA-regulated health plans—is avoided. Younger, healthier groups may benefit.
  • These types of plans are not subject to state-mandated benefits that allow small employers to tailor their coverage to their employees’ needs.
  • Greater transparency is evident in reporting provided by each carrier with respect to costs breakdown.
  • You will stand out as a valued consultant to your client! Many brokers have not yet taken to these new plans and continue to run their business as status quo. Bringing new ideas to save costs will enable you to grow your book of business as you so choose.

Level-funded plans are a great option for many employers, but they are complex. Brokers who serve small-group clients need to be trained on their structure, underwriting methodology, costs, and implementation to be well versed in their approach.

Cornerstone offers the training, guidance, and tools to make you an expert. Let us add value to your agency today. Call one of our A+ professionals to get started.

Are You Ahead of the Small Group Game?

/in , /by

More than ever, health insurance legislation has limited choices and flexibility when it comes to coverage offerings. What was seen as complicated ten years ago, seems simple today. If you are at all involved in the sales and/or service of small group insurance products, you have likely encountered MEWAs or been asked to advise on the pros and cons of such an arrangement.

Multiple Employer Welfare Arrangement, otherwise known as MEWA, is defined by ERISA as “an employee welfare benefit plan, or any other arrangement which is established or maintained for the purpose of offering or providing medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries.”

Historically, MEWAs were made up of related industry groups, associations, etc. and may now include chamber associations. Small employers combine to share in the overall claims risk of the established trust. For these small employers, grouping together may provide a means of purchasing employee health coverage that takes advantage of economies of scale. A group of small employers may be able to negotiate lower premiums and better coverage than what a small employer can negotiate on its own with today’s limited plan offerings.

Some highlights of a MEWA:

  • MEWAs are governed by trustees and by-laws.
    The board of trustees is responsible for oversight of the plan and compliance with all applicable Federal and State law.
  • Ohio’s Department of Insurance regularly monitors financial controls, pricing, reserve funding, plan compliance and governance and issues a Certificate of Authority to approved MEWAs.
  • MEWAs can be fully insured or self-funded. Self-funded MEWAs are more common, heavily regulated, and must maintain stop-loss insurance, which offers protection from large financial losses.
  • Claims administration and service agreements are routinely handled by an established insurer who may also provide network arrangements and services.
  • MEWAs are generally considered a single large ASO employer, which enables unrelated employers to participate in a single plan giving the trust “group purchasing power” for such ASO arrangements and stop-loss coverage.
  • This larger pool of business enables more stable renewal increases. Similarly to most self-funded programs, well-run MEWAs tend to perform below health care trends year over year.
  • MEWAs fall outside the community rating requirements of ACA and risk is medically underwritten, which enables employers to take advantage of preferred health factors.
  • Some MEWAs offer a composite rating.
  • Membership fees vary based on the relationship the MEWA has with a chamber, association or other entity. MEWA groups likely encounter additional employer and/or member level advantages of belonging to the MEWA, such as discounts on other services, etc.
  • MEWAs share a common renewal date and based on filings, may allow one life groups/sole proprietors to participate as long as they are set up according to guidelines established. Those that accept that segment size may not exceed more than 10 percent of their total risk from that “1 life” sector.
  • Considering the volatility in the individual health market, however, this option may prove especially beneficial for these sole proprietors.

This alternative self-funded solution may be a good fit for your small group clients. Cornerstone offers several MEWA options for your small groups. Call us today to see if you and/or your clients may be eligible.

You Don’t Have to be Zuckerberg to be in “The Social Network”

/in , , /by

According to Ryan Hanley, author of Content Warfare, the goal of content marketing is to “create, publish, and distribute media content to acquire targeted, profitable customers and repeat buyers.”

It is no secret that social media has ruled the digital landscape over the past several years. With social media sites continually rising from the ground, it is difficult to keep up with all of the changes. While Facebook once dominated the stage, Instagram, Snapchat, Twitter, and more have now taken the digital space by storm. It can feel overwhelming to even consider getting your business started in this scene, but, by determining which social network platforms your clients are most likely to use and how to use these platforms to your advantage, you can create a simple social media strategy that facilitates your business’s growth and augments your communication with customers.

Social media is a series of websites and applications that are designed for content sharing and communication. Though built for personal use, businesses began to recognize the strength of a social media following and its purpose: to build connections.

Businesses big and small began using social media to drive targeted traffic to their site and establish meaningful connections with their audience. Larger brands like GE and Net-A-Porter have built an impressive following on social media over the years, increasing traffic to their sites and cultivating their brand identities through a landscape on which traditional marketing is unable to capitalize. But even small businesses have success on social media. Coconut Bliss, an Oregon-based ice cream company, uses social media to represent their brand’s authenticity and transparency. As a result, they have garnered more than 17,500 followers on their Twitter account and more than 31,000 followers on their Facebook page—an impressive feat for a small business.

The insurance world has responded to these metrics in kind with agencies and carriers also finding success through various social channels including Facebook, Twitter, YouTube, and even Instagram. For example, UnitedHealthcare has amassed nearly 160,000 Facebook followers, more than 44,000 Twitter followers, 1,500 Instagram followers, and a strong YouTube subscription base at 14,000. But this analysis does not stop at the carrier level because even smaller agencies like Sarasota, Florida-based American Insurance Agencies Direct have reached a Facebook audience of more than 400 and a LinkedIn following of 97.

It is worth noting that these followers come from a variety of backgrounds. Social media is no longer just a pathway for a specific demographic. Though Facebook was originally designed as a medium through which the college-aged youth could communicate, it has since evolved to include a much more impressive following. Data from Statista’s January 2018 examination of the distribution of Facebook users in the United States suggests that most users are in a large margin between the ages of 18 and 65. Additional research from the Pew Research Center indicates that the number of seniors/all adults who go online increased from 14 percent in 2000 to 59 percent in 2013, and this number is expected to continue growing. Yes, even the older generations have a foot in the door—and a large one at that.

It is important to note that social media, above all else, is NOT a sales tool. This is not the right venue to promote your products and services, and it is also not a welcome home for religious and political posts because of their divisive nature. Rather, it is the platform to promote you. This is the network you can use to establish yourself as an “expert” in the industry that stays ahead of the game with research on the latest market news.

But social media is more than just a platform to connect with your clients. Websites like LinkedIn and Facebook are a great medium for promoting and building your brand identity and awareness. Your social media profile and the posts that you share represent your company’s vision and voice. What is it that you want to communicate in these posts? What do you want to say that will engage, influence, and motivate your audience?

Use social media as a key to staying in touch with existing and prospective clients. The social media king himself, Mark Zuckerberg, once said, “Nothing influences people more than a recommendation from a trusted friend.” Become that trusted friend to your client base. Share industry news on your social media sites to show that you stay up to date on the latest trends, and include your own two cents on the piece. Respond to comments on your posts. Engage with your clients and community. Encourage new and existing clients to follow your social media. Start and be a part of the conversation so you can make a lasting impression on your clientele.

Start with one or two platforms (we suggest LinkedIn and Facebook), and begin sharing posts every couple days about news in the industry, and be sure to connect with your audience with “likes,” “shares,” and “comments.” You can also post health tips and educational resources that will help your clients, as well as testimonials from loyal clients, success stories, and inspiring quotes.

Not sure how to get started? Here are a number of different resources that you can use to get your social media off the ground:

Social media is here to stay and it is easier to use and maintain than you might think. Stay ahead of the game and find out what social media strategies work best for you and your business. Don’t shy away from social media—it may be the most important and economic digital marketing tool that you use.

Sources:

Distribution of Facebook users in the United States as of January 2018, by age group and gender

Opioid Use Disorder: An Epidemic That Does Not Discriminate

/in , , /by

Recently I attended a seminar on what has become the nation’s number one health care crisis: opioid use. It was a wake-up call to some astonishing information. Our industry has begun to feel the devastating effects and so far there is no end in sight. The statistics were alarming:

  • Every 16 minutes, there is a death from opioid overdose
  • 1,375 percent increase in opioid treatment spending over five years
  • 4.5 million Americans estimated to have a substance use disorder associated with prescription painkillers
  • $78.5 billion estimated cost of America’s opioid epidemic

According to Center for Disease Control and Prevention mortality data, death rates for young adults ages 25 to 44 has increased from 139.8 per 100,000 in 2010 to 151.3 per 100,000 in 2015, an increase of 8.2 percent in 5 years. In our own backyard (Ohio, Kentucky, Indiana, West Virginia, and Pennsylvania), those increases were 20 percent or more. This is concerning data when you factor in the costs associated and the number of lives destroyed.

In 2016, it is estimated that 59,000 to 65,000 lives were taken from drug overdoses in the U.S. These estimates are conservative, considering unreported or misreported overdose deaths. Compare that with peak car crash death rates in 1972 of 54,589 and peak H.I.V. deaths in 1995 of 50,887.

As opioid use continues to rise, drug overdoses are expected to be the leading cause of death in the U.S. for Americans under age 50. Synthetic opioids, such as Fentanyl and its closely related counterparts, play a major role in driving overdose death numbers to exponential levels. Resources and budgets are strained by the rise in numbers. Increased police, medical care, foster care, and additional administrative burdens have all combined to quickly exceed state and federal budgets.

Many may ask how we arrived at such outrageous numbers. Some thought-provoking background:

From the mid-1980s through the 2000s

  1. First publication suggesting safety of extended opioid use in non-cancer pain
  2. MS Contin approval
  3. OxyContin approval
  4. APS launches “Pain as the Fifth Vital Sign” campaign
  5. Purdue launches $200 million marketing campaign
  6. Multiple new opioid brands and key generics flood market
  7. Opioid Rx volume and death toll skyrocket
  8. Government investigations ensue
  9. Purdue pays $600 million in fines for false promotion
  10. 2012: 259 million opiate Rxs were issued in the U.S.

The opioid use disorder (OUD) epidemic has been driven by the U.S. health care system’s unintentional widespread prescribing of opioid painkillers without realizing the consequences.

  • 80 percent of the world’s supply of all Rx opioids are consumed in the U.S.
  • 92 units is the average number of tablets per Rx. Opioid dependence can start in just a few days. Risk of chronic opioid use increases with each additional day of opioid supplied starting with the third day.
  • 91 percent of patients who experience opioid overdose receive another opioid Rx within 10 months.
  • 80 percent of heroin users report starting on Rx opioids prior to transitioning to heroin.
  • 53 percent of users received opioids free from a friend/relative, while another 16.6 percent took or bought them from a friend/relative.

The CDC publishes guidelines for prescribing opioids which include, but are not limited to:

  • Opioids are not to be the first line therapy for chronic pain.
  • Short duration of acute pain.
  • Three days of therapy should be sufficient, more than seven days is rarely needed.
  • The lowest effective dose is recommended to start.

Interestingly, 44.7 percent of first-fill opioid prescriptions are NOT in compliance with CDC recommendations.

From an insurer’s perspective, the focus is on methods of treatment and the education of providers. Determining the most effective approach to care in order to provide sustained long-term results is critical. Approaching OUD as a long-term chronic condition, instead of relying solely on short-term interventions, is essential. Each patient is unique and needs dedicated appropriate resources and guidance.

Pairing counseling and cognitive behavioral therapy with approved FDA medication to treat substance abuse disorders and prevent opioid overdose are more effective than behavioral interventions or medication alone. Studies suggest that with this medication-assisted treatment, the chances of remission within a year are significantly greater, up to 50 percent compared to 10 percent with traditional treatment. Along with these figures, this type of treatment costs up to 75 percent less than residential treatment. Education of physicians for this treatment protocol is critical and will take time. However, insurance carriers are responding to the needs rapidly and are developing methods to educate both the providers and the public.

In March of 2017, President Trump created a commission to study the crisis and their interim report has made a number of initial recommendations. As of October 2017, the Trump administration declared the opioid crisis a public health emergency.

As we, together, begin to recognize the scale of this crisis, it is critical that we acknowledge that OUD is an epidemic that does not discriminate. Be it the athlete who is prescribed pain medications for an injury and becomes addicted, or a relative who is recovering from surgery, or any one of the many circumstances in which victims lives are taken, let’s not be so quick to judge. Taking a “moral” perspective will not effect change. Instead, we need to come together to find a solution.

Exploring ACA Alternatives

/in , /by

Since the inception of the Affordable Care Act (ACA), many small group employers and brokers alike have experienced constant change and confusion. Premiums continue to rise and many feel there are limited options available to them. Small groups with fewer than 50 employers are not mandated to provide health insurance, but many would like to offer it as a way to fill full-time positions and attract talented employees. Before health care reform, health insurers were allowed to rate up or charge higher premiums to small groups based on their medical history, age, and gender. This made it difficult for unhealthy groups to find affordable coverage.

Healthcare.gov defines community rating as: “A rule that prevents health insurers from varying premiums without a geographic area based on age, gender, health status, or other factors.” Community rating means that all enrollees pay the same premium amount regardless of their health status. The cost is pooled or spread out over a large number of insured people. For groups with fewer than 50 employees, ACA community rating benefitted some and hurt others. Small groups with multiple health conditions or an aging population benefitted from lower rates, while younger healthier groups pay more.

Under ACA guidelines, the “Adjusted Community Rating” methodology is being used. Health insurers aren’t allowed to charge higher premiums based on health conditions, medical claims, or gender. However, they are allowed to charge higher premiums based on the number of employees enrolled in the plan and where the group is located within areas that have higher costs of care. Insurers can consider an employee’s age and whether they use tobacco products. The age ratio of 3:1 means that an older adult cannot be charged more than three times the rate of a younger adult. The tobacco ratio of 1.5:1 means that a person using tobacco cannot be charged more than 1.5 times the non-tobacco user rate.

The ACA’s Health Insurance Tax is due to return in 2018 and threatens to increase already high insurance premiums even more. According to America’s Health Insurance Plans (AHIP), “The health insurance tax (HIT) is a $100 billion+ tax on health coverage for individuals, small businesses, seniors, states, and tax payers. For example families in the small-employer market could see their premiums go up an additional $7,000 over the next 10 years because of this tax. AHIP will continue to push for a full repeal of the health insurance tax because it makes health care less affordable for the very people who need the most help affording health care.”

ACA-compliant plans are fully insured plans. All the risk is passed on to the insurance carrier. These small group plans offer a wide variety of plan designs that can benefit the small employer, however many factors continue to threaten additional premium hikes in the upcoming years. Small business owners are faced with controlling their costs. It’s not surprising that over half of small group employers do not offer health insurance coverage. As ACA premiums continue to rise, so does the need for ACA alternatives. When ACA plans arrived, small employers were allowed to keep their coverage with only minor changes to their plan or risked losing their transitional (grand-mothered status). Now, as these small group employers consider moving to ACA plans, some may see a premium reduction, while others will see significant increases. The employer groups that can’t find a reduction will stay on their transitional plans to avoid ACA as long as possible. However, with transitional plans soon to expire, employers need alternative options.

Level-Funding Options

Many of the health insurers have already provided alternatives to ACA plans and are currently available to small businesses. Historically, self-funding has been a viable option for large group employer with 100 or more employees. The introduction of level-funding has created an alternative for groups in the small group market. Level-funded plans are self-insured plans with predictable premiums and are available to groups down to 10 employees. These plans have a low specific attachment point. The healthier groups usually receive the more attractive rates since they are medically underwritten. Groups that select a level-funded product option will have level or fixed monthly premiums. To be considered for coverage, groups must be healthy and approved by the underwriters. Lower risk groups may pay premium rates lower than ACA rates, while higher risk groups will pay premium rates higher than ACA rates. Many of the small groups that qualify for level-funding options will not be familiar with the concept and will rely heavily on their broker for expertise.

Level-Funding Cost components:

  • Administrative Expenses
  • Stop loss (Specific and Aggregate)
  • Claims fund (paid by the level-funded entity). At the end of the coverage period, a shared savings opportunity exists for groups with claims surplus.

At renewal and if the group had a low claims year, there should be minimal rate increase. In a bad claims year, the employer never has to pay more than the level premium amount because the stop loss coverage protects them. However, they should expect to see a rate increase and now have the option of moving to a community-rated ACA plan if premium savings exists.

Multiple Employer Welfare Arrangements (MEWA)

A Multiple Employer Welfare Arrangement (MEWA) is another popular alternative to ACA plans. MEWAs were created several years ago and can benefit small groups down to two employees. They are a self-funded insurance plan where multiple employers pool their financial resources and share their risk. MEWAs are member-owned profits that stay within the group and can be dispersed among the member companies. Much like the level funding, employer groups must qualify medically.

Typically a board of trustees is formed to manage the MEWA, enabling greater flexibility in selecting plan designs and meeting the overall needs of the group. MEWAs can implement programs that promote wellness and can save overall claims costs of the group, which ultimately lower premiums. Since the group is in control within the MEWA, there is increased stability and lower tax rates for the member companies that don’t exist with fully insured plans.

Small group employers, along with their brokers, are facing a dilemma. Many employers want to offer coverage for their employees while attracting talented future employees. Premiums are on the rise and options were limited, but adversity breeds solutions. The insurance industry has answered and created alternatives for the small group market by providing level funding and MEWA plans.

Please contact your Cornerstone sales representative to learn more about our partner carriers that offer MEWA and level funded alternatives now available to your small group clients.

CONTACT US

1-800-248-7675
8:30 am to 5:00 pm EST
Monday–Friday

UPDATES

Events
Blog

WHO WE ARE

Join Our Team
Community Involvement

RESOURCE CENTER

Webinars
AGB
FormFire

WHAT WE OFFER

Individual
Employee Benefits
Agency Services Program
Licensing and Commissions

CONNECT WITH US

Twitter YouTube LinkedIn Facebook