As of January 1st, 2016 the definition of small group has been expanded to include groups with 51-100 full time equivalent employees.  For groups that will be making the transition, the changes are significant and should be reviewed in detail with a small group specialist.  Since 70-80% of renewals will take effect in Q4 of 2016, it is imperative that you consider all options as soon as possible to familiarize yourself with the new ACA mandates.

Rating Regions – Large group rating regions vary by each carrier.

Small group consists of 19 regions that are standardized for all carriers.

Rating Structure – Large group rates are composite (same rate for each member) and are generated based on the average of employee ages, tiers, genders, and zip codes.

Small group rates are determined on a member level based on employer location, where employees and dependents are rated independently.  While age bands can vary by carrier, you will typically see the same rates for age 0-20, one band for each year between 21-63, and one band for age 64+.  Dependents under the age of 21 will be rated individually, up to 3 children.

In addition, the ACA has imposed a 3:1 ratio for small group rates.  The rate difference between the youngest to oldest may not exceed a 3 to 1 ratio.

The biggest rate increases will hit groups with good medical and SIC risk, and employees with dependents age 20+.  Conversely, young employees may experience rate decreases.

Carriers release one set of rates and all groups receive the same standardized rates based on the enrollee’s age.  Rate negotiations are not allowed, so the service from your broker and additional perks to help administer your employee’s benefits will be at the forefront for broker selection.

ACA provisions – Small group business is guaranteed issue as long as participation and employer contribution requirements are met.  In addition, there is a special annual open enrollment period (Nov. 15th – Dec. 15th for a Jan. 1st effective date) where groups cannot be declined based on participation and/or contribution.  Groups must still consider the employer shared responsibility provision to offer affordable minimum essential coverage or potentially be fined by the IRS.

Small group plans must include the 10 essential health benefits mandated by the ACA, and all plans must fall into one of four levels of coverage: Bronze, Silver, Gold, or Platinum (less plan creativity).

Underwriting – Small group underwriting is quicker, and allows for participation alongside Kaiser.  Underwriting requires applications or declinations from all eligible employees prior to approval, along with the required submission of legal docs for owners, payroll for new hires, and DE-9C’s.

Additional note – Networks and pharmacy formularies may differ for small and large group products offered by the same carriers.