The Business Journal asked area insurance experts about changes employers can expect in health insurance coverage in 2018.
Offering insights in the following discussion are Michael D. Parr, employee benefits broker, George Petersen Insurance Agency Inc. in Santa Rosa; John Fradelizio, managing director, USI Insurance Services, in Petaluma; and Jordan Shields, president of Arrow Benefits Group in Petaluma.
On Jan. 5, the Department of Labor proposed new regulations that would allow small employers to band together and provide coverage under a single Association Health Plan. Advocates say that this change make it easier for small businesses to afford better coverage for their employees. Critics point out that it is a way to get around the Affordable Care Act requirement that plans cover essential health benefits. What is your opinion?
Mike Parr: I currently have access to and provide association group health insurance plans to my clients. It is important for the broker/agent representing Association Group Health plans to make sure that even though the new Association plan costs may be lower, that the benefits being offered by the employer to their employees include the same or richer level of benefits than are currently being offered.
And that there is adequate underlying carrier network coverage for the locations of all employees. The potential consequences of allowing more association health plans is the current California small group (less than 100 employees) pool/claims experience may be negatively impacted causing further small group health insurance increases.
John Fradelizio: This regulation offers smaller employers hope that there may be alternatives to the ever-increasing costs of health care. To be clear, the ACA did very little to address the overall cost of health care as its primary focus was on providing access to all Americans.
Contrary to what some believe, the ACA is not the primary driver of rising health care costs; however, it did cause many smaller employers with healthier, younger members to experience significant rate increases due to very restrictive community rating.
In contrast, the ACA also caused older, sicker groups to benefit by rate stabilization, at the expense of the first group. This, combined with the additional requirements for coverage, left many small employers to feel that the ACA worked directly against them. These proposed regulations would allow associations to identify the good risks (i.e., younger and healthier populations), place them in a pool and offer lower rates and eliminate essential benefits.
Unfortunately, those left in the community-rated pool will see their rates increase dramatically since they’ve lost the stabilization provided by the younger and healthier groups. Any savings these employers would see from eliminating the essential benefits would be wiped out with the premium increases. Employers considering purchasing their benefits through an Association Health Plan would be well-advised to proceed with caution.
Jordan Shields: If the association is well-run there could be better rates, but historically, that has not the case. The problem is the association has to start from zero and build underlying carriers. Also, if the larger market rates start looking better than the association rates, members will start to leave. I have seen this happen over the years with poorly run associations. I for one don’t get excited about association health plans. It’s a pipe dream of the republicans for the next, better-run market.
Health benefit costs are predicted to rise by 4.3 percent in 2018, the highest since 2011, according to Mercer, a global health and benefits administrator. Cost for pharmaceuticals is also expected to rise more than 7 percent as spending on new specialty medications is expected to skyrocket. How will this affect employers?