Health Insurance Renewal Strategy for 2014
By Harold Christensen, Benefits Advisor, CFP, Inc.
The most common question I hear is: “what should I do when I renew?” The second most common
question is: “is my plan compliant with Health Care Reform?” Both questions are important and
require time to work through; seldom is there a cut-and-dry answer.
Compliance is easier to define so I’ll address it first. If you are a small group (less than 50
employees) and are on a new 2014 plan, you are compliant with the Affordable Care Act – you are,
“ACA Compliant”. If you have not yet renewed in 2014 you are probably not ACA Compliant.
However, this is not a problem…yet. Depending on what carrier your health insurance is with there
may be multiple options to choose from – including staying not-compliant. In short, as a small
group, you may not need to be ACA compliant.
Groups with 50 or more employees need to be more concerned with the “Employer Mandate” than
being ACA Compliant. Large groups were not offered “2013 extensions”; so these groups should
be ACA compliant upon renewal.
Determining what strategy to use when renewing is a much more difficult issue to work through,
and what we will address in this article. Our goal is to give you some guidelines that will assist with
your upcoming renewal. For ease, we’ll break this down by group size and address what to watch
for.
Small Groups; 2 - 50 employees: These will have the most tedious options to wade through
depending on what date the current plans renews.
September renewals may be the most frustrating. Some carriers are requiring groups with a
September renewal to move to a 2014 ACA compliant plan. These plans will incorporate Essential
Health Benefits, a mandatory pharmacy plan, Pediatric Dental and Pediatric Vision. If you currently
have a basic high deductible health plan with no pharmacy you may suffer sticker-shock at
renewal. Be prepared to restructure your benefits. This may be the time to offer multiple plans.
Offer a ‘base’ plan and allow employees to choose from a suite of plans with less or more benefits
than the “base” plan. With this option, employees who want a better plan can pay the additional
cost themselves. If you have paid a percentage of the employee and/or dependents cost in the
past, consider switching to a flat dollar amount – a ‘defined contribution’ – to help shift the cost.
Look at other ways to cut cost. If you have dental and vision, consider making them available on a
voluntary basis.
Renewals in Oct, Nov and Dec The complexity of 4th quarter renewal options will require more
time and attention in sifting through details than ever before. There are three basic viewpoints; and
you should compare all three before making your decision.
1. Extend your 2013 plan. Carriers allowing those with 4th quarter renewals to extend their
2013 plans for another year are doing so providing you make no changes in benefits. This
goes back to last year when the Administration made the statement: ‘if you like your plan,
you can keep it’. Keeping your plan means you cannot make any benefit changes. This
includes adding or dropping riders as well as increasing/decreasing your deductible. To
“extend” your plan, you must still be on a 2013 plan. This would not apply to anyone who
has already renewed in 2014. Once you move away from your non ACA Compliant 2013
plan you cannot go back.
2. Move to a 2014 ACA Compliant plan. Depending on what benefits you currently offer,
moving to a new ACA Compliant plan might make sense. If you already have a pharmacy
plan, deductible under $3000, and incorporate a dental plan, switching to a new ACA
Compliant plan may be your best option. This brings your plan in line with Health Care
Reform and allows you to better plan for future renewals. Make sure you are advised on
how deductibles and out-of-pocket co-insurance is credited on your new plan. Also check
to see if there is a ‘4th quarter carryover’ or not. Deductibles normally carry over, out-ofpocket co-insurance usually does not.
3. Short renewal. This is the most complex option as it ‘bridges’ your current plan to a new
2015 plan design. Last year carriers collectively missed the mark with 2014 plan designs
and pricing. For 2015, carriers are trying to correct their mistakes by offering more
attractive plan designs and more competitive pricing. This third option suggests renewing
on your existing 2013 plan but only through Dec 31st, 2014. During this renewal you will
simultaneously choose another plan or carrier to move to as of Jan 1st 2015. This option
would be done specifically to take advantage of 2015 offerings/rates. For many groups, as
complex as this is, it may be the best way to take advantage of better pricing in 2015 and
become ACA Compliant.
Overall, if given the option to renew your 2013 plan – called “Grandmothering” – it’s most likely
the least expensive option. Plan designs and rating factors have both changed for renewals on or
after January 1, 2014. Each carrier has defined their own process regarding “extensions” – with
little conformity. At this time most carriers are allowing 2013 extensions. Pacific Source is allowing
July – Dec renewals to extend their 2013 plans for another year. Regence is specifying 4th Quarter
renewals may extend their 2013 plans. Currently, Moda is not allowing any 2013 plans to extend;
all Moda groups must renew with ACA Compliant plans.
Employers who believe they may be eligible for the “Small business health insurance credit” need
to know that only specific carrier plans offered through the Marketplace (Exchange) will qualify for
this credit. The coverage can be purchased from the Exchange or direct from the carriers; but the
plan(s) must be on the list of qualified plans. Make sure to do your homework in advance. If you
are trying to qualify for the tax credit, picking the wrong plan could make you ineligible.
A new change in small group renewals revolves around what carriers term “owner only” policies.
HB 2240 made some changes on how small groups are defined. This could impact you if everyone
on the plan is also an owner of the business. In order to qualify for small group health insurance, a
business must include at least one active employee that is not an owner, s-corp shareholder, or
spouse. The concerning language from HB2240 is: For purposes of determining whether a group is a
small employer, an owner is generally not considered an employee even if the owner performs
services for the business for compensation. As long as you have at least one employee who is not an
owner, and working at least 17.5 hours a week or more, you should be fine.
Some carriers have stated they will non-renew employer-only plans. Others have stated they will
renew employer-only plans but not write them as new business. If you receive a notice regarding
non-renewal call CFP, we can help you with options.
Large Groups: Here we need to break it down a little further – two brackets: Groups with 51 to
99 employees called Mid-Size Groups, and true Large Groups with 100 or more employees.
Mid-size groups with 51-99 employees will get some breaks in 2015. These group renewals may be
the closest to ‘business as usual’ as it gets. Carriers see these groups as being some of the most
lucrative to go after so market quotes may be very competitive. These businesses will be exempt
for another year from the Employer Mandate – more commonly referred to as “Pay or Play”.
Large groups with 100 full time or more employees will be heavily vied for…but cautiously.
Carriers know these are the companies most likely to retain and/or increase benefit offerings.
Determining the number of employees can be an onerous task. A full-time employee is a
permanent employee who works an average of at least 30 hours per week, or 130 hours a month.
This includes paid hours: vacation, holiday, sick time, paid layoff, jury duty, military duty and paid
leave under the Family and Medical Leave Act. Seasonal and variable-hour employees can be
treated differently. Businesses with over 100 employees will be subject to the Employer Mandate
in 2015 which requires certain employers to offer “affordable and adequate health insurance” to
full-time employees and their dependents. Under the ACA, dependents are defined as children
under age 26. Spouses are not considered dependents.
Failure to provide coverage may result in a penalty for any month coverage is not offered. It will be
important at open enrollment to update signed waivers for all eligible employees who are not on
your plan. If you have questions on how the Employer Mandate affects your company, contact CFP
for more information. We recommend having a “Pay or Play” analysis done well in advance of your
next renewal.
Individual Plans: All individual plans sold in 2014 must be renewed or replaced by January 1st
2015 regardless of when you started your plan. This is a new rule. In the past an individual plan had
a ‘fiscal’ renewal or was valid for 12 months from when the plan started. Now all individual plans
sold in 2014, regardless of when they went into effect, will end December 31st 2014. You will need
to either renew your existing plan or move to another plan at Open Enrollment. The Individual
Open Enrollment Period for 2015 is from November 15th 2014 to February 15th 2015. During this
time anyone with an individual plan, or plan through Cover Oregon (the Exchange), must renew or
replace their plan for 2015 coverage.
It’s important to remember that once the Open Enrollment Period ends individual coverage cannot
be obtained unless there is a qualifying event. Qualifying events are: marriage, birth or adoption
of a child, involuntary loss of health coverage due to job loss, divorce, death, moving to a different
county where your current health plan cannot provide coverage. Don’t assume your existing plan
will automatically renew. Some action or response on your part most likely will be required.
Should I keep a plan?
Yes. Failure to have health insurance could subject you to the Individual Mandate penalty.
Although the penalties would be less for some people than obtaining coverage, the cost of a major
medical event overshadows the premiums you would pay for a basic health plan.
Moving from Group to Individual coverage:
We have seen an increase in small employers considering abandoning group plans and having
employees obtain individual plans. Some employers feel reimbursing employees for their
individual plans may be less expensive. Although having an employer pay for individual coverage
sounds good, it can only be done with after tax dollars. Only group coverage can be paid on a pretax basis. We have seen articles referring to using a Section 105 plan to allow businesses to pay for
individual plans pre-tax. We do not advise going down this path. There is no question the IRS has
made it very clear you cannot do this on a pre-tax basis. For more information on this read IRS
Notice 2013-54 and section 4980D of the Internal Revenue Code. They are very specific in outlining
the rule and penalties associated with non-compliance.
Our office would like to help you navigate the complex world of Health Care Reform. If you have
questions about this article, health reform, or any other benefit related question, please contact us
by phone at: 866-532-0417 or by email to: [email protected]. CFP has been working with
OCAPA for several years and appreciates the opportunity to help with your benefit planning.