Under the Affordable Care Act (ACA), Health Insurance Marketplaces (formerly referred to as Exchanges) are places where individuals and small businesses can go to shop for insurance plans and compare those plans based on value, affordability and market standards. The intention of the Marketplaces is to make shopping for health insurance as easy as shopping online through a site like Expedia.com. The plans offered in the Marketplace conform to consumer protections based on providing essential health benefits, and being accessible – i.e., not turning away those with pre-existing conditions (PEC), extending the dependent age to 26, etc. However, because of the necessity for plans to be accessible to everyone, with limited regard to risk factors, all Marketplace plans are subject to Community Rating rather than underwriting.
The Community Rating in the Marketplace is actually modified to help balance risk; it is not Strict Community Rating. Strict Community Rating means that everyone who enrolls in the health plan pays the same premium regardless of risk. Modified Community Rating allows some degree of premium variation based on limited individual risk factors. Those risk factors include: age, tobacco use, geographic area, and family size. Large Group plans, like ISIhr’s plan, are individually underwritten based on the group’s risk, therefor not subject to Community Rating. ISIhr is one of the best options small businesses have to access a large group, protected plan that avoids Community Rating.
Although the initial plan was to release Marketplace premium costs during the Summer of 2013, the ACA will now only release the specifics of the plans and their costs when they open enrollment on October 1st. So there is plenty we don’t know about the costs involved and what the Community Rating will be. Because the plans must be available to all individuals, many who were previously denied health care because of high risk factors will now be required to purchase insurance. And because of the amount of new high risk being included in the pool, the premium cost are projected to substantially increase overall. In fact, several states have announced preliminary rates that are up to 80% higher than last year.
Though there is a lot we don’t yet know about the cost of these plans, we do know there will be 4 levels of coverage, with catastrophic plans available to individuals under 30 or those who would otherwise be exempt from purchasing insurance because the premium exceeds 8% of their income. All 4 plans must offer the required essential health benefits.
- Bronze: benefits equivalent to 60% of the full actuarial value of plan benefits,
- Silver: benefits actuarially equivalent to 70% of full value,
- Gold: benefits actuarially equivalent to 80% full value, and
- Platinum: benefits actuarially equivalent to 90% of full value.
Qualified health insurers must offer at least one plan at the Silver level and one plan at the Gold level in each Marketplace in which their plans are offered. Details on the plans and their costs will be available after October 1st.
How Will the Marketplace Operate in Utah?
Each state was given the option to choose whether they wanted the Federal Government to operate their state’s Marketplace, or the state to run it themselves. Utah is unique in that is was allowed to split this decision. Utah chose to continue to run its own SHOP exchange, Avenue H, for small businesses and employees, and turn over operation of the Individual (and Family) Exchange to the Federal Government.
SHOP (Small Business Health Option Programs)
Small businesses who choose defined contribution plans through SHOP may be eligible to receive a credit from the government. However, those credits go away after 2 years, and we don’t know what they will be replaced with, if at all. For a small business to qualify to purchase insurance through the SHOP, they must be very small (2-50 employees) and meet other requirements as well.
Individuals and their families can purchase insurance through the individual exchange if they do not have current coverage, cannot afford or are not eligible for their employer’s health insurance. Subsidies are available to those with a household income below 400% of the Federal poverty level. However, after 2016, those subsidies are not defined.
What Happens on October 1st?
The Marketplaces open, small businesses and individuals will be able to view and compare plans and cost, and enroll. The Open Enrollment Period for the Marketplace will last for 6 months, closing on March 31, 2014.
When Are Marketplace Benefits Effective?
Depending on when an individual enrolls, they can receive coverage no earlier than January 1, 2014. Those who enroll before December 15, 2013, will have an effective date of January 1st. After December 15th, if an individual enrolls before the 15th of the month, the plan becomes effective on the first of the following month. If an individual enrolls after the 15th of the month, the plan becomes effective on the first of the next 2 following months.
What Does This Mean for ISIhr Clients?
Choosing to offer health insurance to your employees is a great strategy to build loyalty and attract and retain skilled employees. With ISIhr, clients, including small businesses, have access to large group, affordable health insurance that fully complies with ACA’s regulations. Although large employers do not have to offer insurance to their employees until 2015, and small employers are exempt from the Employer Mandate, on January 1, 2014, all individuals still must obtain health insurance or pay a penalty tax. Are you reasonably sure your top performers won’t leave to work for an employer who provides health insurance? Sending them out to the Marketplace as individuals, or going there yourself as a small employer, means being subject to Community Rating, unknown costs, increased compliance issues, and a potential loss of control over your employee’s benefits. ISIhr is here to handle all of the regulation for you, offer you a better solution, and make doing business easier on you and your employees.