Employer Exchange Plans – May 2013

The Patient Protection and Affordable Care Act (PPACA) is tasked with eliminating or at least lessening the gap between what older consumers pay for health care compared to what a younger consumer would pay for their individual health care coverage. Inside the new health insurance exchange program, it can create newfound gaps in the rate of what coverage costs for an older enrollees and newer enrollees in some small-group health plans. Employers will have options to help lessen that burden.

As a refresher, PPACA mandates that the U. S. Department of Health and Human Services (HHS) and states set up a system of exchanges, or web portals, that are health insurance marketplaces for individuals and small groups by October 1st of this year. PPACA requires that all exchange plans  must cover standardized “essential health benefits” (EHB), and will also require that all plans sold through an exchange fit into one of four “metal levels” based on the percentage of the actuarial value of the EHB package that the plan covers.

“Bronze level” plans must cover about 60 percent of the actuarial value of the EHB package, “silver level” must cover 70 percent, 80 percent coverage for gold plans, and about 90 percent for the top line platinum plans. HHS will enforce SHOP exchanges to give employers the option of letting employees choose from a coverage menu that includes all exchange plans offered at a given “metal level”.

PPACA is limiting the maximum ratio between the price difference for the oldest enrollee and the youngest enrollee to 3 to 1, as compared to the current average ratio 5 to 1. As employers are choosing between different “metal” plans, they will have to decide whether to use a composite rate system, a list bill system, a combination of those systems, or some variation on the composite rate or list bill approach.

In a plan that uses a composite rate system, all employees in a group pay the same rate, regardless of age. The main factor leading to all employees paying different rates is family size. In a plan that uses a list bill system, employees would pay age-specific rates that were calculated individually, using age, geography and tobacco use. Today employers using list billing are able to choose between paying a fixed amount per worker or a fixed percentage of premiums. Current PPACA regulations would no longer allow employers to pay that fixed amount per employee.

Now is the time to look at your employees and/or clients group and help guide them in the direction that best suits their bottom line. Composite premiums tend to be standard in most states, but are not a one size fits all system.

We will continue to keep you up to date as more developments arise. As always, please contact our Government Relations team with any questions. By phone: 888-277-6464 or by email: bbochniak@michbusiness.org  we value your feedback.