Small Group ACA Presentation
Looking to 2015 and Beyond
Key Terms
ACA = Affordable Care Act FTE = Full Time Equivalent
GF = Grandfathered Health Plan GM = Grandmothered Health Plan ER = Employer
EE = Employee
MCR = Modified Community Rates
PEO = Professional Employee Organization
MEWA = Multiple Employer Welfare Arrangement SF = Self Funding
DOL = Department of Labor IRS = Internal Revenue Service SPD = Summary Plan Description
Medical Plans for Small
Employers
Small Employer Designation
Less than 51 full time & Full Time Equivalent (FTE)
No Employer requirement to offer coverage
No Employer requirement to meet affordability
I Have Less than 51 Employees
What are my medical plan options?
“Grandfathered” Plans
“Grandmothered” Plans
ACA Plans
“Grandfathered” Plans (GF)
Very few carriers offer GF plans Plans in place since 2010
Employer & carrier extremely limited as to any benefit changes
$5 OV increase
5% Deductible increase 5% Out of pocket increase
Payroll cost to employee almost “fixed” in nature
Employee share % cannot increase by more than 5%
Avoids Modified Community Rates (MCR) & Essential Benefit
Provisions
“Grandmothered” Plans
D.C. ’s political solution to employer push back & carrier
apprehension
Modified solution to “If you like your plan, you can keep it”
Avoids Modified Community Rates (MCR)
More renewal options than GF plan
Multiple carrier interpretations about options at renewal
Old Premium Rating Methodology
Applicable to both Grandfathered and Grandmothered
plans
Premiums could be adjusted due to:
Male/Female Age
Company location Company SIC code
MCR
Modified Community Rates
Up to 18 regions in state of Ohio are allowed
Rates are uni-sex
Only premium modifiers allowed are:
Age
Zip code Tobacco use
In essence MCR has created large, state wide, high-risk
Premium Rating Calculations
Old systems allows up to a 6 to 1 ratio*
23 year old male $125
64 year old male $750
Total monthly premium $875
New MCR under ACA rules requires a 3 to 1 ratio
23 year old male $219
64 year old male $656
Total monthly premium $875
*Approximate Ratio
6 to 1 Ratio
69% increase 12% decrease
ACA Plans
MCR in effect
Smaller subset of GF & GM plans
Some carriers also have limited networks to
keep costs down
Once ACA plan is elected, GM &GF plans are no longer
available to Employer, i.e. “no going back”
Guarantee issue still required of carriers
Ohio one of 5 states to implement the “untested” SHOP
Alternatives to ACA Plans
PEO – Professional Employee Organization
Partially Self Funded Plans
MEWA – Multiple Employer Welfare Arrangement
PEO
Professional Employer Organization
Employer becomes co-employer with PEO
Employees could become direct employees of PEO
PEO management fees apply
Payroll taxes & worker’s compensation also transfer to
PEO at the PEO rates
May have better benefit options and rates due to being
part of large group
PEO can be fully insured or self funded
Partially Self funded
Employer determines risk to “take on”
Employer purchases stop loss protection, specific &
aggregate
Potential run out issues could exist in some carrier
contracts
Employer can always move to ACA plan at renewal
although contract terms may leave employer exposed to additional financial risk at contract termination
Self Funding Cost Indicators
Fully Insured Self Funded
Federal taxes $$ $ + State taxes $ - + Admin charges $$ $ + Risk pool $ - + Expected claims $$$ $$$ = Total expenses $$$$ $$$ + Claims corridor (10-25%) - $ + Run out - $ + Profit $ ??
Self Funding Contract Type-12/12
January 12 Months December
Claim incurred
ER responsible with no Stop Loss protection
Claims processed & paid
Self Funding Contract Type-12/15
January 12 Months December
Claim incurred
ER responsible with no Stop Loss protection
April Claim processed and paid – Stop Loss
protection in place
MEWA
Multiple Employer Welfare Arrangement
Numerous employers joining forces to share risk/rewards
Usually billed at mature rates, i.e. no run out issues Needs the safety of rock solid stop loss carriers &
agreements to protect employer from unexpected risk
Exhaustive state and federal oversight exists today
Sorted past a challenge to overcome, bad perception in
MEWA Funding
Modified self funding
Monthly funding rates generally include all SF components “Walk Away” contract
Pooled resources are the key to cost controls & pricing models Each group is medically underwritten, creating rates indicative of
underlying risk for each group Age/sex factors apply
SIC code could apply
Superior contract compared to stand alone self funding arrangements
The ACA Balancing Act
The Affordable Care Act has created significant government oversight, regulation and employer challenges.
Regulatory enforcement courtesy of the Internal Revenue
Service (IRS) & The Department of Labor (DOL)
Compliance issues are numerous but easily dealt with
Summary Plan Description (SPD) continues to be tops on the
ERISA Compliance
Summary Plan Description
Must be furnished within 120 days of the start of ERISA Plan Must be furnished within 90 days of Participation
Updated SPD must be furnished at least once every 5 years to
all covered Participants
Method:
To be furnished in a way “reasonably calculated to ensure actual receipt of the material” using a method
“likely to result in full distribution”
A Carrier “Certificate of Coverages” is NOT an SPD A Carrier “Certificate of Coverages” is NOT an SPD A Carrier “Certificate of Coverages” is NOT an SPD
How to get your SPD
Fulfill the ERISA requirements for an SPD and avoid penalties Alpha client cost $450/up fee waived (regularly $650 +
set-up fee)
To receive enrollment kit and discount email [email protected]
Includes:
Separate Plan Document and Summary Plan Description (wrap document) ERISA and Affordable Care Act Notices at no extra charge
Summary of Material Modification
Instructions on how to distribute information to employees
Email alerts regarding changes to ERISA or IRS requirements that could impact Wrap
SPD and Plan Document compliance
The Alpha Group specializes in the design and implementation of employee benefits plans, including retirement plans.
Established in 1988, Alpha provides Insurance Products and Consulting Services to over 1100 businesses in Ohio. Our client base ranges from individual contracts to those with well over 1,000 employees in numerous states. Alpha is one of the top 15 Insurance Agencies in Northeast Ohio as reported by Crain’s Cleveland
Business.
Employee Benefits • Business & Personal Insurance • Retirement Plan Services HR Consulting Services
John Wain, Principal
The Alpha Group Agency
4200 Rockside Road, Suite 300 Cleveland, Ohio 44131 216.520.3300 |800.886.3315
[email protected] | www.TheAlphaGA.com
