It is no surprise that fully insured group medical plans continue to face increases. There are many variables in play causing the increases but the community rating rules in particular negatively affect generally healthy employer groups.
The ACA rules forbid fully insured small group plans to determine rates based on health of the employee population
This rating approach is appealing to older and sicker employee populations. By the same token, the younger and healthier groups are paying more to balance the risk of the older or unhealthy employer groups. So is there another option?
Small business owners with 10-49 employees should explore a level fund plan option
Prior to the ACA, rating structures were based on underwriting the health of the group. Healthy employer groups were able to get considerably lower rates due to their good health and low risk factors. ACA community rating rules are now based on age, geographical location, family composition and tobacco usage (in some scenarios).
ACA pricing rules in the fully insured small group market differ from those on self-funded platform
This can allow small businesses a new product option to try to reduce and control their costs. These plans are not limited by the community rating rules and insurers can provide pricing based on the risk they present.
These level funding plans can provide lower rates along with the security of a fully-insured plan without the risk
Employer groups with better than average health can see significantly lower premiums. These employers also benefit from better plan design options and the potential for refunds or credits if claims run better than expected.
For healthy groups, it is not uncommon to see 20-30 percent difference between fully insured community rates vs level funding option. Best thing is if there is bad claims experience or the health of the employees go south, they can move back to fully insured market risk pool.