ANDOVER, MA--(Marketwire - Mar 25, 2013) - Small businesses and self-employed people in Massachusetts could get hit with a 30% or higher hike in health insurance premiums in 2014 because of new regulations related to Obamacare, broker Jim Edholm, president of Business Benefits Insurance, is warning his clients.
Edholm explains why.
Only Massachusetts and one other state have merged their individual and group insurance rates via a state insurance exchange, he points out. The Obama administration's rules for states with merged group/individual plans say the carriers can only issue one set of rates per year, instead of the quarterly revisions currently used in Massachusetts.
Additionally, insurers will be able to use only four underwriting factors, instead of nine currently allowed.
"Removing five of those factors will result in severe disruptions to white-collar firms in particular," Edholm said. "Once industry rating factors are removed, the ditch-digging firm gets the same underwriting calculation that the software consultant does. It's ludicrous."
Because of the one-rate-per-year requirement, the employer that renews on January 1 will get the same rate as one that renews on July 1 -- even though the July 1 firm has half of its health care delivered in 2015, not in 2014.
Small employers will no longer have a plan-year deductible. They'll have a calendar-year deductible starting at renewal in 2014. "Any company that renews anytime other than January 1 will go back to zero on renewal and start on the deductible all over," he says.
Companies that renew next January will have 12 months of 2014 claims; those that renew in July 2014 will have six months of 2014 claims and six months of 2015 claims -- and so on. Yet they'll all have the same price, he notes.
Therefore, January 2014 rates will include costs for all of 2014 and a large fraction of 2015, Edholm says.
"Insurers will have to factor into next year's rates additional taxes under national healthcare reform (about 3% to 5% per year), medical inflation trend (about 3% to 9%), and 18-plus months of claims related to the above, at least 1.5 times as large as the sum of the last two factors," he says.
Additionally, underwriters are cautious; the further out they forecast, the more padding they put in.
"I hope it won't be a 30% to 40% hike, but it certainly could be," Edholm says. "Some employers would drop healthcare because there's no federal penalty for employers with under 50 employees, and the Mass. penalty is peanuts. Employers who keep healthcare may lay off employees. It would be disastrous for Massachusetts."
The governor and attorney general must file for and receive an exemption from the Feds before March 29, he says.
"Only if everyone raises their voice before March 29 can this be avoided," Edholm says. "Call your state representative, state senator, Attorney General Martha Coakley and Gov. Deval Patrick and tell them to file for an exemption," Edholm says.
Business Benefits Insurance specializes in group insurance programs for employers with up to 250 employees.