Health care hits home: Insurance rates can double

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As we all know, the new group health insurance rating structure is being implemented for Jan. 1 for groups with 50 or fewer full-time equivalent employees.

The Blues were among the first to release these new rates – and it’s not a pretty sight for many small companies.

The first three companies I decided to analyze saw potential increases of 72 percent, 38 percent and 128 percent for their first renewal in 2014.

Ouch.

Luckily, these companies took advantage of an early renewal offer given for Dec. 1, so they will have another year to figure out how they are going to tackle that type of increase.

On the flip side, there are winners.

For example, we insure a small construction firm whose employees’ average age is 47. In the previous structure, the firm saw its rates increase from year to year, based on poor utilization. Because of medical underwriting, it has not been able to move carriers or negotiate competitive rates.

For 2013, the firm is paying a single rate of $696 for a $3,000 deductible plan. On the 2014 rate chart for a comparable plan, its new average rate will be $479.

While the average rate is going down, there are employees of the group who are around 60 years old and will be charged $832 or more going forward.

Overall, the group premium is going down by 20 percent, but as you can see, it’s complicated.

Now, back to the losers in this equation, which I feel will be the majority of the 500 employers that we insure.

Keep in mind that the 2014 rate chart is the same for every small employer in Lehigh and Northampton County. That’s right, if you are buying the PPO 3000 plan with Capital Blue Cross, your 2014 rates will be according to a standardized one-size-fits-all grid — no negotiation.

The first company that I presented these rates to was ABE Doors and Windows in Allentown, with 23 covered people.

Jim Lett, the owner, happens to be my father-in-law, so I figured I would get that one out of the way.

He always has offered a quality benefits package, so he has a number of loyal longtime employees. His company’s average age for employees is 50, and we’ve been able to negotiate some pretty good rates through 2013 by moving carriers and going through medical underwriting.

ABE Doors and Windows currently has a Capital Blue Cross plan through the Chamber of Commerce with a $3,500 deductible and paying a single rate of $288 a month.

In this scenario, even the youngest member at 26 is going have a rate of $314 in 2014, while the company’s average employee will have a rate of $547. There are a few 60-plus members, and their rate will be $832 or higher.

Overall, his group premium will rise by 72 percent. He decided to renew early, so he was able to lock in at a 3 percent increase through November 2014.

Going forward, he will need to make tough decisions on how to design his benefits package and manage his employees’ contributions.

Let’s now look at a sample family of five with 50-year-old parents and children ages 23, 21 and 18. The monthly rates:

Parent 1: $547. Parent 2: $547. Child 1: $306. Child 2: $306. Child 3: $194.

That’s a total of $1,900 a month.

In summary, even if you are a small employer that took advantage of an early renewal offer from your existing provider, you should be exploring the Jan. 1 rates to see what you may be up against in 2014.

You need to think about your employee contribution strategy and overall plan offering that will help you mitigate some of these rate changes and help keep coverage affordable in the post-Patient Protection and Affordable Care Act world.

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