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Small employers face a dollars-and-sense decision: renew pre-Obamacare health plans, or shift to ACA-compliant ones

President Barack Obama.
President Barack Obama. - ()

Thousands of small New Jersey employers are now deciding whether to keep their old, pre-Obamacare health plans for another year, or make the switch to new plans that conform to the Affordable Care Act. Bottom-line cost differences between the old and new plans are the main driver of these decisions — and in some cases small employers are finding that a new Obamacare policy is a better deal financially.

The ACA made sweeping changes to health plans starting Jan. 1, 2014, but in November 2013 President Barack Obama announced that small employers and individuals could keep their old plans if insurers agreed to renew them.

Insurers in New Jersey didn’t continue offering their old individual policies, most of which were “basic and essential” plans that were in substantial noncompliance with the ACA.

However, the option to keep the old plans was available in the small group market. Depending on their insurance carriers, many small employers with fewer than 50 workers were able to keep their old, pre-ACA plan into 2014.

Horizon Blue Cross Blue Shield of New Jersey, the state’s largest small group insurer, kept the old policies alive through an “early renewal” option. Small groups whose old plans were set to come up for renewal in 2014 were given the option of renewing them early, before Dec. 1, 2013 — and thus keep them for another 12 months.

Now, Horizon is offering to renew for another year old plans that come due in the fourth quarter of 2014. Horizon told NJBIZ that this option is available to approximately 13,450 small groups whose plans are up for renewal during the fourth quarter of 2014.

Last year, UnitedHealthcare also allowed its small group clients keep their old plans, and is now renewing them for another year. Unlike Horizon, which will only renew old plans that come due in the fourth quarter, UnitedHealthcare is renewing old plans that come due at any point in 2014.

Insurance brokers are now working with small employers covered by Horizon and UnitedHealthcare, and analyzing their options to see if it makes sense to stick with the old plans, or to switch over the new ACA plans.

William Corson, vice president of group benefits at AEPG Wealth Strategies in Warren, said the cost differential between the old and new plans varies widely from one employer group to another. “I’ll see one client and the (new ACA policy) is 40 percent higher, and then I’ll go to a different client a half-hour later and the new ACA policy is less than what they are currently paying.”

Sean Keegan, senior groups account manager at AEPG, agreed: “I looked at one group and the old plan rate was 20 percent higher,” but the premiums were flat if he switched the client to a new ACA plan. “And then the next group I pull off the pile, it’s the exact opposite.” He said that, in one case, “The new ACA plan was a much better price” than the old plan.

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AmeriHealth New Jersey did early renewals last year, but is not renewing old plans for a second year. Both Aetna and Cigna opted not to renew the old plans, but instead moved to the new ACA plans.

Mike Munoz, senior vice president of sales and marketing, AmeriHealth New Jersey, told NJBIZ: "In December 2013, we offered small groups an early renewal option to maintain their current policies for this year in order to ensure a smooth transition. We now are focused on migrating all of our subscribers to ACA-compliant plans to assure adherence and allow members access to the enhanced benefits available through the ACA-compliant plans. Our systems are ready for this transition."

AmeriHealth said about 450 groups took advantage of the early renewal option.

Meanwhile, Cigna spokesman Mark Slitt said: “In 2013, we had already migrated our New Jersey small group and individual customers to ACA-compliant plans before we received regulatory guidance about retaining non-ACA-compliant plans. That was a small number of customers, and as far as I can tell, we did not receive any customer requests to keep the non-compliant plans.”

The 2014 ACA plans require pediatric dental coverage and have different deductibles and other features, but in New Jersey they aren’t significantly different from the old plans, which are already subject to certain ACA rules as well as New Jersey’s health insurance mandates, which in some cases go beyond federal law.

For example, all plans, both old and new, must offer preventive care without copays and let parents keep their children on their policy until age 26.

But a major change with the new ACA plans involves how the insurance carrier quotes the premiums to the small employer. In the past, the insurer would give the employer a “blended” rate. For example, every single individual in the group and every family in the group would have the same premium. Under Obamacare, every individual in the group gets a separate premium, primarily depending on age; family coverage varies by the ages of the parents and the ages and number of their children.

Keegan said for one of his small group clients, an employee with a spouse and three children paid $1,000 a month under the old plan, which increased to $1,800 a month under the new ACA plan.

Insurance brokers said some employers are coping with the new rating structure by averaging the premiums to avoid wide swings in premiums from one worker to another.

Insurance broker David Oscar of Altigro said it’s not necessarily a good deal to stick with an old plan: “It all translates to dollars and cents. If the dollars and cents are not attractive, what is the point?”

One of his clients is a law firm that pays $29,000 a month in premiums. If the firm sticks with the old plan, that will rise to $33,000 a month. Oscar said he will recommend that this client save money by switching to a new ACA plan, at $27,000 a month.

Another client had a choice between an old plan with a $3,000 deductible and a new ACA plan with a $6,000 deductible. Oscar said the premium for the old plan is $30 a month more than the ACA plan, but it’s worth paying a slightly higher premium to get a plan with a far lower deducible.

Steven Paragone, employee benefits specialist at Northeastern Benefit Services in Princeton, said whether to stick with the old plan or move to a new one “is a case-by-case, client-by-client needs analysis.” And, he said, in addition to cost, benefit designs are a big factor. “We are looking at the overall plan design, and what the employer is trying to do with their benefit plan to attract and retain quality employees. Price is a major driver of the decision, but that is certainly not the only consideration.”

Christine Stearns, vice president of the New Jersey Business and Industry Association, said the transition to the ACA has been difficult for many small employers. “So any continued relief from the (insurance) carriers to ease the move into the post-ACA world for these small employer groups is helpful for many of them.”

Right now, carriers are renewing old policies into 2015 — and they could continue even longer.

In March the federal government announced a two year-extension of this “transitional” option, saying the old plans could be renewed until Oct. 1, 2016 — and thus remain in force through 2017.


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