Among the many changes established by the ACA was a change in the definition of small group market from 50 or fewer employees prior to its enactment to 100 or fewer employees following its implementation. As with many others of its provisions, an ACA transition rule allowed this change to be postponed until 2016 if a state so chose. While there has been some buzz that further postponement at the federal level may be a possibility, in June California SB125 separately adopted the 100-employee threshold (as calculated by the “pay or play” formula), thereby pre-empting the possibility of further postponement for California employers.
What does this seemingly straightforward change in what constitutes a small group mean? Historically, insurers have rated small and large groups quite differently. Not only will this continue to be the case going forward, but under the ACA, small groups are also now required to provide a certain level of benefits, should they choose to provide coverage for their eligible employees. Employers with between 51 and 100 eligible employees who will first fall into the small group market category in January 2016 have some specific considerations to think about. (By the way, it’s important to note that even while becoming a small group for rating purposes, this group of employers is still subject to the “pay or play” provisions for “Applicable Large Employers” which for this segment also takes effect in 2016.)
- Small group plans are required to provide a core package of “Essential Health Benefits” (EHBs) in their plan with any annual or lifetime maximums removed and with cost-sharing limits no greater than the high deductible health plan’s single or family out-of-pocket limits (for 2016 $6,550 single/$13,100 family). Preventive services may not have any cost sharing component. (For the complete list of EHBs at the federal and state levels, click here.)
- The network access available to small groups may not necessarily match their current large group network access, even with the same carrier.
- Small groups will make their plan selections from a carrier’s metallic tiers (bronze, silver, etc.) so they may have less flexibility in plan design.
- Unlike with the large group segment, a small group must account for all eligible employees either by providing their application or their acceptable decline of coverage, (e.g. being covered under a spouse’s plan), prior to the group’s final approval by the carrier.
In light of these new considerations, many California carriers are offering early renewals and extended contracts for both existing and new customers so that a group may retain their large group status in some cases through the end of 2016. Since rates will be closely tied to a group’s own demographics, it is a good idea to solicit both small and large group rate quotes to help determine which option will ultimately work best for your group. If you aren’t already speaking with your broker about this, we highly recommend that you ask them about this soon, so that you have a jump start ahead of the late year rush and meet your carrier’s requirements and deadlines for requesting an early renewal.