Community rating comes full circle in New York City

There are few businesses or individuals for that matter that have not been impacted in some fashion by the passing of the ACA back in 2010.  Now, 6 years into its 12 year roll out, the ripple effects are being felt through small and large businesses and the insurance industry as a whole.  For New Yorkers, our state was ahead of the curve when it came to regulating the insurance market.  Businesses with between two and fifty employees have had to deal with state mandated rates (bronze, silver, gold and platinum) for years now, but as of Jan 1, 2016 businesses with under one hundred employees are now also bucketed as "small group" and therefore can't go to market with their own employee experience for benefits.  Just another wrinkle for the growth focused entrepreneur to manage.

There were options to push the impact of community rating off though, right?  Enterprising brokers offered their clients extended renewal terms to December 1, 2016 or the "punt" strategy.  For business owners and growth focused HR directors, this made sense.  The business could reassess towards the end of 2016 and by then potentially your population had grown beyond the one hundred person mark.  Other businesses joined a PEO (professional employer organization) benefiting from a PEOs buying power.

PEO options and paperwork. 

Depending on the PEO the business may not have as many health care options (where art thou, Oxford?) or may no longer be fully-insured.  Or the business may find out around Thanksgiving time that even though the PEO manages their payroll, benefits, and is utilized as the HR system of record they will not be filing the required forms for the ACA (1094, 1095c) with the IRS.  But the business saved a bundle on benefits, avoided community rating, and freed up head space to focus on revenue generation and the development of their workforce.  Solid trade off, unless the PEO you signed up for didn't underwrite you correctly and you still end up with a 30% increase in year two.

2017 rate increases?

 Those companies who didn't renew early or take the PEO path?  It has not been smooth sailing in 2016.  Depending on plan design (benefit richness) and employee experience (did anyone get sick? lots of babies?) some businesses had to deal with the doubling of their rates year over year.  This led to very tough decisions around (1) benefit offerings and plan richness and (2) should this additional burden be passed on to the employee? 

Young, healthy pools.

 The ACA was designed to help the uninsured get access to quality health care, but these public exchanges, like all insurance pools need customers- young and healthy customers. The flood of new health care consumers and the controls put in place by New York State have created a situation where insurance providers do not have much control over their risk pool or the ability to, in their eyes, price affectively.  This is the main reason that Empire Blue Cross Blue Shield left the small group market back in 2012. 

This is also the reason that Oxford now only offers one out-of-network plan to the small group market in New York State.  Formerly, if you wanted to keep your doctor no matter the health care network you were in, your reimbursements would be based on what is known as Usual Customary Reimbursements (UCR).  Basically, those UCR calcs were based on the zip code where the doctor practiced and would reimburse between 70% and 90%. Now, Oxford's only out-of-network plan, the Freedom plan, is directly tied to Medicare and repays 140% of the national average.  And just like everything else in New York City, doctors charge quite a bit more for similar servicesin comparison to markets like Oklahoma or Kansas.  For the low, low price of $1,180 per month, singles in NYC can pay thousands out of pocket every time they see a specialist. 

Look back periods.

 OK, that's great, but my business just crossed over 100 people in 2016.  I can go to market and my healthy millennial population will be highly sought after and I'll be able to negotiate and build out plans with my broker.  Perfect- punting worked.  But wait, can you prove your business was over 100 in 2015 for your look back period? Because it's what your average was over your look back period (2015) and not your current headcount that matters.  The increase will vary wildly, but there are businesses who have reported nearly 80% increases when looking at community rated plans.  This should not be considered the norm at all, but a 30%-40% increase is a very real possibility going from an experience rated plan to a community rated one. 

Oh and the IRS now actually wants those pesky 1094/1095c's fully filled out, unlike in 2015 when they just required businesses to file.  Anyone else receive a blank 1095c in the mail from a former or current employer?  This is in order to start levying all the fines associated with the ACA legislature.

The last hazy days of summer are leading into a hectic fall for the NYC healthcare market.


Adam Gregorius