As renewal data for 2015 group health plans roll in, benefit advisers say they’re seeing double-digit premium increases and a wave of employers electing to drop group health coverage altogether. That trend, they say, is expected to accelerate in 2015.
Seventy-eight percent of brokers surveyed by the San Francisco, Calif.-based technology solutions company Benefitter say they’ve had clients drop group health coverage this year, with a surprising 17% saying they expect to lose more than one-quarter of their business.
“That’s a faster acceleration than we would have expected,” says Benefitter’s CEO Brian Poger, but understandable since individual rates are rising at a more manageable level.
“The fact that rates are continuing to climb significantly in the small-group market, even faster than health care inflation, we believe will cause this trend to accelerate,” he adds.
Kelly Fristoe, an adviser with Financial Partners in Wichita Falls, Texas, says he has several clients considering dropping health care coverage and sending employees to the exchange.
“I’m working on several Jan. 1 2015 effective rate renewals and three out of the eight on my desk right now are considering dropping health care coverage altogether. One of those is definitely dropping it,” he says.
For some employers, health insurance is no longer affordable. One-third of brokers surveyed by Benefitter observed rate increases above 60%.
Further, “a small group that has 15 lives usually doesn’t have the HR resources to manage the notifications and reporting requirements of the ACA, not to mention ERISA requirements.”
Fristoe adds, “All these employers want to do is go back to their business. They don’t want to be in the insurance business anymore.”
He says some employers would rather not assume the risks involved with offering group health care coverage and are choosing to increase salaries as an effort to help their employees purchase individual coverage. For some employers, their employees can actually find more affordable options on the individual market, particularly if they qualify for subsidies under the Affordable Care Act.
Fristoe cautions, however, that employers considering dropping coverage and sending their employees to the exchanges need to make certain their employees won’t be disqualified for subsidies through an offer of coverage from a spouse’s employer.
Employer size matters
Brokers told Benefitter that double-digit increases were affecting 77% of small-group employers (10-50 lives) and 75% of mid-size clients (50-250 lives), with 60% of large employers seeing double-digit increases.
Barry Fields, vice president of employee benefits with the Holmdel, New Jersey-based agency Jacobson Goldfarb Scott Insurance, handles mostly midsize to large employers and says none of his clients have dropped group health coverage this year. In fact, he says, many are expanding coverage to employees working 30 hours a week or more, who may not have been covered previously.
For small employers, however, Fristoe says, the numbers dropping group coverage will likely increase, especially in 2016 when grandfathered and grandmothered plans will no longer qualify as acceptable coverage.
Still, he says that while some of his firm’s small-group clients have decided to drop coverage, they still remain clients of the firm.
“When a small-group employer decides to drop health care coverage, there’s a morale issue to deal with amongst the employees,” he says. “We’ve helped our clients through that. The successful brokers are the ones that are going to be able to do that.”
“We’re trying to be strategic in how we approach our renewals,” he says. “They still want us to come in and we’re not ready to lose that business. But we may have to work a little harder.”
Fristoe says for his small employer clients that drop coverage, he walks each employee through the process of enrolling for individual coverage on and off the exchange.
Benefitter also works with brokers who want to move employees to individual coverage, offering a range of Web-based tools that help administer employee notices and guide employees to the individual market and through the insurance-selection process.
In the changing post-ACA insurance environment, Poger says brokers have three choices: They can watch their book of business dwindle as employers drop coverage, be reactive by setting up shop to help enroll individuals; or create and use new approaches to enrolling their clients,
“The existing approach isn’t working anymore,” he adds.
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