Double Digit Increases are Expected in 2016

The Affordable Care Act (ACA) has reformed the rating practices of health insurance carriers in the individual and small group markets by limiting the factors that can affect premium rates. So what does that mean for your small group health insurance premiums? Most likely double digit increases. Small businesses with employee populations that are mostly young and male will see the biggest impact.

The reason for the increase is due to forced community rating. Community rating, also known as composite rating, is the practice of lumping all eligible employees together and assigning a single rating, regardless of individual factors (such as age, gender or tobacco use) that may make an individual a higher or lower insurance risk. Health insurance plans may have grandfathered premiums that small groups have taken advantage of since 2014, but many of those plans are retiring and new policies are being written. By 2017, all grandfathered rates will no longer be affective.

Another provision is for tobacco users. These individuals can be charged rates up to 50 percent higher than non-tobacco users. Alternatively, all other rating factors will be prohibited. In other words, several factors commonly used by health insurance carriers to set higher premiums prior to 2014 (rating factors such as health status, claims history, duration of coverage, gender, occupation, small employer size and industry) can no longer be used.

In Florida, community rating will effect employers offering group health insurance that have less than 50 employees. Having an experienced broker will be the most effective way to minimize the premium increases. Full service insurance brokers have access to many different options that can help keep rates affordable and coverage comprehensive. Level funding, finding an alternate health insurance carrier, or utilizing a professional employer organization are just some of the strategies a broker can help a small group explore.