Small Business & the ACA – Transitional Policies

Since 2013, many small businesses have been protected from the full effects of the Affordable Care Act. They have been allowed to maintain health plans that existed prior to the passage of the law, known as transitional or “grandmothered” plans, which favor the youngest and healthiest employee groups.

The time allowed to maintain these policies has been extended for what seems to be the last time. Earlier this year, Health and Human Services (HHS) stated that transitional policies must end by Dec. 31, 2017.  Under the extended transitional policy, grandmothered plans will not be considered to be out of compliance with the ACA’s market reforms. Florida adopted this extension allowing Floridians to take advantage of the lower premiums throughout 2017.

Additionally, HHS has stated that they will work with issuers to implement the extended transition policy, including options that begin on Jan. 1, 2017.

According to HHS, this approach will facilitate smooth transitions from transitional coverage to ACA-compliant coverage, which requires a calendar year policy in the individual market. However, with double digit rate increases in both the individual market and post-ACA small group plans, employers have many more considerations as they contemplate what this transition will do to their bottom line.

Considering that post-ACA small group risk pools tend to include older and less healthy populations, rates are expected to increase if an employer with a grandmothered plan simply accepts an ACA compliant small group renewal. Instead, should begin laying the ground-work to ensure their population remains healthy. This allows the employer to take advantage of other ACA compliant programs that will continue to shield them from the full rate effects of healthcare reform including:

  • Alternative Funding of Premiums
  • Purchasing Health Insurance through a PEO
  • Receiving Premium Discounts by Implementing a Wellness Plan

Each of these programs requires lead time for building a post-ACA strategy that fits your company’s goals and to educate employees for a smooth transition. Use of these programs often yield lower premiums and creates a more sustainable benefits program.

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