Tag Archives: small employer health insurance

Final rule considerations for association health plans

In October 2017, the Trump administration issued the “Executive Order Promoting Healthcare Choice and Competition Across the United States.” This sought to provide additional health insurance coverage options for small groups and individuals outside of the Patient Protection and Affordable Care Act (ACA) market. One option the executive order addressed directly is the association health plan (AHP) for small groups and certain individuals.

In January 2018, the proposed rules for AHPs were issued, and in June 2018, the final rule was released.

Prior to the release of the final rule, associations did not have a well-defined pathway to being determined bona fide. Instead, each association’s facts and circumstances were evaluated against three broad issues:

• Does the association exist for a purpose other than providing benefits?
• Do employer members of the association have a close enough relationship to be essentially a single common entity?
• Do employer members control the health plan in form and substance?

With the new pathway identified in the June final rule, the second criteria is made much more explicit and can be satisfied by demonstrating that association members share a common industry or geography.

Many, if not most, of the currently existing associations, including local and national chambers of commerce, local or national industry groups, professional groups, and regional interest groups, could fairly easily fulfill all the conditions to become a bona fide association under the latest rules and thereby offer a large-group health plan as an employer. This was not the case prior to the president’s executive order.

In this article, Milliman consultants Fritz Busch and Jason Karcher examine the final rule released in June, evaluate considerations for sponsors of AHPs, and briefly assess the final rule’s impact on the small-group health and individual markets.

How to stabilize the ACA marketplace ahead of change

Any upcoming changes to the Patient Protection and Affordable Care Act (ACA) will not likely be fully implemented until 2019 or 2020. The stability of the individual and small group health insurance markets during this period of transition will depend on the regulatory changes that are made in the interim and the transparency of those changes.

A new paper by Milliman’s Lindsy Kotecki and Hans Leida presents five key considerations for promoting market stability for the 2018 and 2019 benefit years under the assumption that they are transitional years with many current ACA rules in effect.

1. Don’t collapse the stool.
2. Extend risk mitigation programs.
3. Extending the transitional policy.
4. Consider interim rule changes carefully.
5. Transparency is key.

Plan design strategies in the ACA marketplace: A review of Unified Rate Review Template data

What patterns in plan design offerings have been seen in the marketplace during the first three years after the implementation of the Patient Protection and Affordable Care Act (ACA)? Individual market member projections exhibited a preference for lower-cost plans with health maintenance organization (HMO) plans and plans at the lower end of the allowable actuarial value (AV) range being the most popular. In contrast, small group membership projections shifted toward higher AV ranges within metallic tiers, which illustrates different preferences in the small group market.

By looking at trends in plan offerings, even at a macro level, insurers may be able to gain insight from emerging patterns in the market to help frame marketplace strategies in future years. Milliman’s Abigail Caldwell and Jordan Paulus offer more perspective in this paper.

Healthcare reform and the small employer tax credit

Houchens-PaulThe Internal Revenue Service (IRS) has recently published guidance as a proposed rule on the tax credit that is available for small employers (fewer than 25 full-time employees) that will offer or are offering health insurance coverage under the Patient Protection and Affordable Care Act (ACA). This tax credit, under new tax code section 45R, is a sliding scale for purchasing health insurance for employees.

Beginning in 2014, the tax credit will only be available on the Small Business Health Options Program (SHOP) exchange and is equal to 50% of the employer contributions (35% for small employers eligible to be tax-exempt). It should be noted that on September 26th, the Department of Health and Human Services (HHS) announced that the enrollment functions of the federal SHOP exchange will be delayed until November 1.

To qualify for this tax credit, small employers must meet the following criteria:

• Employees’ average annual wages must be less than $50,000. Employers with 10 or fewer employees and average annual wages of less than $25,000 (adjusted for inflation for taxable years beginning after December 31, 2013) will qualify for the full tax credit.
• Employers must contribute at least 50% of the total premium cost or 50% of a benchmark premium.

The final IRS rule is expected to be published after December 31, 2013, but the IRS provides a transition period, allowing employers to rely on the “proposed” rule for taxable years beginning after December 31, 2013, and before December 31, 2014.

The number of small businesses applying for the small group tax credit to date has been less than expected, causing some to speculate that determining qualification for the small group tax credit has been overly complicated. The Milliman HCR Dashboard, a new tool specifically for brokers, insurers, and advisors serving the small and mid-size group market, can determine if a small group may qualify for the tax credit based on census, premium, and employee contribution data. The HCR Dashboard also estimates the amount of the credit, making adjustments for group’s average salary, location, number of employees, premium amounts, and tax status. While small businesses still need to seek assistance from a qualified tax advisor when applying for the small group tax credit, results from the HCR Dashboard can provide an indication of whether such assistance should be sought as part of a complete healthcare reform analysis for a small employer.


Interesting comparison of individual, small group, and large group health insurance markets

In the ongoing debate over healthcare costs—and especially over the Patient Protection and Affordable Care Act (PPACA) mandates concerning medical loss ratios—it is interesting to revisit a 2011 Milliman report on the commercial health insurance market using financial and enrollment data from the “Supplemental Exhibit.” From the paper’s introduction:

What level of market competition exists in the current health insurance marketplace? Are administrative costs and underwriting margins in teh individual and small group markets significantly higher than in the large group market? How does claim cost experience vary between individual and small group markets?

In the past, these questions have been difficult to answer because insurance carrier financial experience was generally only reported on an aggregate basis rather than at the state level or for a specific segment of the commercial insurance market. Because of the introduction of a new financial exhibit that must be completed with each carrier’s year-end statutory filing, many of these questions can now be answered with greater clarity.

Some of the report’s interesting findings include:

  • Significantly higher per member per month (PMPM) administrative costs for individual and small group markets
  • Higher medical loss ratios for large group markets
  • Market share is most concentrated in the large group market, with 44 states having five or fewer companies representing 90% of market share or more

The paper also covers the influence of rating rules on individual and small group premiums, showing how requirements for community rating affect claim cost ratios across different regulatory regimes.