The Next ACA Victim – How Mid Sized Employers are about to be blindsided

Paula L. Wilson, RHU, REBC

Paula L. Wilson, Inc.

updated June 2016

Much has been said about the market changes brought about during the implementation of ACA and how those changes continue to affect how health insurance is distributed.  From large corporations to Mom and Pop shops, employers are doing what they can to keep the coverage flowing.  When you know where you stand, it’s easy to plan ahead for predictable market changes and upcoming compliance issues.

However, a large sector of the current “employer market” is about to be blindsided with more change at once than any other employer sector since the inception of ACA.  These employers think they are members of the large employer market and are acting as such.  Nothing could be further from the truth.  No market sector is less prepared for the change ahead.  Employers with 51-99 employees are being thrown into the small group market while simultaneously becoming subject to the large employer “Shared Responsibility” and “Reporting” mandate.  California insurers, so far, are not offering to relieve these employers from the age rating that is sure to wreak havoc on their administration and 1095 IRS reporting duties.

In the past, these “51-99 employers” have enjoyed the ability to negotiate rate and benefit levels for their employees.   Benefits are designed for their specific employee population and rates are computed and issued on a “composite” basis.  (Meaning one rate applies to all employees regardless of age.)  Strategies are then put in place to help keep employees healthy to reduce claims in order to maintain the high ground during annual rate negotiations.

On January 1, 2016, employers with 51-99 employees are going to find themselves unprepared for their new market and compliance requirements.  Just a few of their new required tasks include:

1) Determine PPACA impact with the completion of their measurement period tracking, per IRS guidelines.

2) Complete new PPACA required reporting forms IRS 1095-C and 1094-C for every month of 2015.  Conscientious tracking now will save overwhelming re-creation of the data later.    The  IRS has prepared a 14-page instruction manual for completion of these forms.  .

3) Go to market in the newly expanded Small Group Market to find things work a bit different.  One thing is certain – you can’t keep your current plan.   In the small group market, rates are non-negotiable, plans are limited to four approved “metal” tiers as determined by ACA guidelines and billed rates are based on the actual age of each employee! ( In one year age brackets.)

4) Determine a plan (or plans) that are appropriate and competitive for all* of your employees based on the “affordability” rules of ACA.   This large employer now has 45+ age rating categories PER PLAN!   Rethinking your contribution scenario that fulfills ACA rules, is palatable to your employees, AND makes monthly tracking of the 1095-C detail reasonably possible will take some time and specialized knowledge.

This is overwhelming, but not an impossible task when prepared and fully armed with the facts.  However, the lack of media coverage of this potential time bomb for mid sized employers is tragic.  Health Insurance Agents, Financial and Tax Advisors are already going to be overwhelmed during the national open enrollment when all of this hits during 4th quarter and these employers are out there scrambling for help.   The time to help these employers is now.  The time for them to help themselves by seeking proper planning advice is now!

The American Academy of Actuaries predict that this new segment of the redefined “Small Group Market” will account for 30% of that new small group market.  The impact on the small group market could be catastrophic in short order.   Employers thrown into this new system have some decisions to make.   Historically, employers with high risk, high claim populations tend to head for the fully insured market.   Employers with healthier populations may consider the self funding options available to them.   This adverse selection will put rapid upward pressure on small group market rates.

Keeping in mind that we entering a national election cycle, all of this is subject to delays, twists and turns over the next few months. Getting to the right benefits expert for planning advice is imperative for this sector.   We should all be working to get this word out now!

Paula L. Wilson, RHU, REBC is owner/agent of Paula L. Wilson, Inc. An insurance agency specializing in employee benefit in Southern California since 1986.  paula@paulawilson.com  951-694-1009