Not even halfway through the new year, state health officials and insurance companies are already looking ahead to January when the small-business market in the health insurance exchange will see a major shift in its landscape.
The Patient Protection and Affordable Care Act states that on Jan. 1, 2016, the “small-group market” will expand to include employers with as many as 100 employees, up from a cap of 50 employees.
New York faces the challenge of having to blend two different-size groups of businesses into a more than 20-year-old marketplace while also easing the larger group into a different insurance rating system — a task that some experts say will be difficult.
In 1992, under Gov. Mario Cuomo, New York started using a community rating system to determine premium rates based on family size and region for health insurance plans with businesses of fewer than 50 employees. For large businesses, which were considered companies with more than 50 employees, New York rated premiums based on “experience,” using factors such as age, gender, type of business and claims experience.
As it stands now, New York will be forced to merge these two market groups in about eight months, and a portion of the large group — 51 to 100 employees — will no longer have health care rates determined by age, gender and other factors.
James D. Schutzer, an insurance broker and vice president of J.D. Moschitto & Associates Inc. in White Plains, said the shift would likely cause some market disruption that would cause rates for large- and small-group businesses to fluctuate.
“Probably the bigger disparity and the most drastic changes will be on the other end,” Schutzer said, referring to the businesses of 51 to 100 employees, “where you have a desirable industry with good demographics and their rates jumping up” when larger groups lose the ability to tailor their plans based on factors like demographics or industry.
But it’s hard to say what companies will see initial increases or decreases in rates because that will come down to what the business was paying before and which insurance carriers are involved.
Schutzer, who is also the president of the New York State Association of Health Underwriters, summed up the market merger like this: “It’s a one-time sticker shock, if you will, of going from a large group to a small group. And then going forward you’ll just be dealing with the year-to-year increases like every other group.”
The state small-business marketplace, called the Small Business Health Options Program, or SHOP, had 3,106 businesses with 50 or fewer employees enrolled, according to a Business Journal report in November. Those businesses enrolled just under 9,800 employees statewide. New York officials have a goal of having 415,000 employees enrolled in SHOP by the end of 2016.
Businesses in the small-group market are not required to offer health insurance to their employees. But companies with between 51 to 100 employees are still considered a large group under the employer mandate of the Patient Protection and Affordable Care Act and could still face a penalty fee if they don’t cover health insurance for 95 percent of their full-time employees.
Increasing the size of SHOP’s community-rated insurance pool with the addition of companies of up to 100 employees will probably have good long-term effects, Schutzer said, because “it’s going to spread the risk out, so it should drive down overall costs.”
However, there are six U.S. senators who are hoping to delay the January change, a move they say would mitigate a potentially “harmful and disruptive” impact on the new small-group market.
In a March 12 letter to Sylvia Mathews Burwell, the secretary of the U.S. Department of Health and Human Services, senators from Delaware, North Dakota, West Virginia, Maine, Indiana, Montana and Missouri urged her to postpone the change for two years.
The senators warned that without the delay, affected businesses “could experience higher premiums, less flexibility and new barriers to coverage,” adding that a postponement would allow the market to “more smoothly transition to the new rules.”
For New York, however, the proposal to delay the change would need to be decided sooner rather than later because the state Department of Financial Services expects insurance companies to file 2016 premium rates in May.