Featured Health Business Daily Story, April 16, 2013
Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.
In marketing materials for brokers and agents obtained by HPW, Aetna Inc. spells out options under its Premium Savings Program that could allow small-group employers to avoid the full impact of the Affordable Care Act (ACA) well past the Jan. 1, 2014, date that many provisions kick in. By employing “off-cycle” renewals, which are allowed under the ACA, a policyholder can extend a current plan for nearly all of next year and possibly avoid the 30% to 40% or more premium spike many predict when the provisions take effect.
Critics say plans using this loophole permitting current coverage to remain in place until the plan year expires could help distort risk pools in new exchanges starting operations in 2014. But other industry observers view the Aetna offer — and those expected from competitors — as a marketing tool to retain current members and win new ones before the full brunt of the ACA hits. These provisions include plans having to meet all of the requirements of the essential health benefits rules, limiting plan deductible amounts and strategizing around the new 3:1 age-rating bands in the ACA.
Such Aetna customers would not be “grandfathered” under the terms of the ACA. Grandfathered policies that were in place before the ACA was enacted in 2010 are not required to meet all of the law’s mandates as long as insurers or employers don’t make significant changes to the terms and conditions of the plans.
“They are playing games, is what it is. In a normal year they would never do this. Some smart lawyer found a loophole,” Sabrina Corlette, J.D., research professor at the Georgetown University Center on Health Insurance Reforms, tells HPW. By delaying the impact of the reform law, these policies, if extended into 2014 for younger, healthier people, could result in a less healthy risk pool for exchanges. But, as Corlette says, this would allow only a one-year delay, and “plans will have to come online with the ACA the following policy year.”
The three-page note from Aetna says early renewal options, which one market source likened to a magazine asking subscribers to lock in current rates for another year, are “one way that we can help provide cost savings to some of your clients during this time of change.”
New mandates taking effect in 2014 “will mean that some individuals and small businesses will pay more for their health coverage, and others less, depending on their unique factors,” Aetna spokesperson Stephanie Ancillai tells HPW. “The new ACA requirements also will mean some health benefit plans that customers have selected previously will not be available to them in 2014. Individuals and small businesses may have the option to keep the plan they have, which can help save premiums and avoid disruption.”
Aetna warned in the marketing materials that dramatic increases in premiums may be in the offing. “Factors such as essential health benefits, maximum plan deductibles, the application of new taxes and fees and new rating rules will combine to push insurance premiums up substantially for some small businesses. The rate impact can vary,” the insurer said. In December, Aetna CEO Mark Bertolini said he expects that premiums for individuals or small groups seeking coverage on health insurance exchanges will be in the neighborhood of 20% to 50% higher in 2014 (HPW 12/17/12, p. 4).
Aetna’s proposed solution is to alter typical renewal dates. “By electing a fourth-quarter 2013 renewal, some of your clients can achieve significant cost savings in 2014 and take time to assess their business needs for the future,” Aetna said. Among the options offered to clients is an off-cycle renewal between Sept. 1 and Dec. 1, 2013, keeping current benefits and rate levels in place for the following 12 months. Another option is to maintain the current renewal cycle in 2014 and move to the ACA-based plans. The insurer also noted that some accounts “may benefit by moving to Aetna due to competitive rates that remain constant from July 2013 through December 2014.”
Aetna’s marketing materials did not provide estimates of cost savings, and the company declines to provide further details on the program.
The materials point out that advance notice is required for groups interested in the Premium Savings Program. “Groups with a current Jan.-June renewal need to request an off-cycle renewal 90 days prior to the requested effective date, with acceptance needed 45 days prior to [the] new renewable date,” the insurer said. Aetna also asked brokers and agents to mark their calendars for a series of webinars on the savings program in April.
UnitedHealth Group and Cigna Corp. did not respond to queries from HPW on whether they too are offering programs similar to Aetna’s.
Robert Laszewski, president of Health Policy and Strategy Associates, LLC, tells HPW there is a business case for plans using every means at their disposal to help keep clients happy, including via early renewals. “The bottom line here is that everyone is expecting rate shock and looking for ways to smooth the transition for as many customers as possible. This can buy up to a year for small employers and individuals, and perhaps give everyone a year to figure out how we are going to deal with the much higher rates that are coming,” he says. “Some people say the insurers are about to ‘game’ the system. Tell that to the existing policyholders that are about to get slammed with huge rate increases.”
But Henry Aaron, the Bruce and Virginia MacLaury senior fellow at The Brookings Institution, tells HPW the real issue is what happens when the insurance plan expires since “the ACA is intended to be around indefinitely.” It is not as important, he says, that some small groups will see a delay in experiencing the full effect of the health reform law.
Tim Jost, a Washington and Lee University law professor and consumer representative for the National Association of Insurance Commissioners (NAIC), tells HPW the so-called loophole has been in the reform law the whole time, allowing for an effective date phase-in for policies that don’t have an end-date of Dec. 31, 2013. Some provisions of the ACA will be in force no matter the “mini-grandfathering” that may occur, he says. “For instance, reinsurance provisions apply to all plans on Jan. 1,” Jost adds.
Some states have taken steps to curtail the off-cycle renewals into 2014. The Los Angeles Times on April 2 quoted Oregon Insurance Commissioner Louis Savage as saying such renewals could be problematic, leading his office to bar any extension beyond March 31, 2014. “We want to get as many people as possible into the exchange,” Savage told the newspaper. “I think having renewals go deep into 2014 is counterproductive to the goals of the federal healthcare law.”
© 2013 by Atlantic Information Services, Inc. All Rights Reserved.
What do you think? Is shifting the coverage cycle deeper into 2014 a bad thing, or is it simple business at work, with the impact negated by the fact that eventually all reform law stipulations will be part of everyone’s brave new insurance world? Join the conversation at the AIS Blogs.