Employers take Cost Increase Now to Avoid Obamacare Mandates for up to 11 Months

All across the country, small employers of 50 or fewer employees, are debating whether they should do an early renewal in December 2013, or go with whatever their normal scheduled health insurance renewal is in 2014.

If they do nothing, their employee health insurance plans will be subject to numerous Obamacare mandates that take effect 1/1/2014. The most onerous of the mandates is called Community Rating. Under Community Rating, employers are charged the same rate based for any employee who is the same age, regardless of the employee’s health. That means that healthy employees, and non-healthy employees are charged the same. As a result of this mandate, rates go up for people who are healthy in order to subsidize the rates of the non-healthy.

Secondary, the restriction of age-banding mandate reduces the difference that an insurance company can charge based upon age. As a result, insurance companies will need to charge more for younger people in order to subsidize older people.

By some accounts, these mandates are expected to increase costs by 25 to 89%. In Ohio, the Insurance Commissioner predicts cost increases exceeding 40%.

As a result, insurance companies are offering small employers early renewals to avoid these mandates. If an employer accepts an early renewal, the employer’s revised renewal date will become December 1 of each year.

However, the early renewal does not come without a cost. Insurance companies are tacking on a 3 to 5% increase to account for healthcare trend. Regardless, brokers and consultants are advising employers to take the increase, and avoid Obamacare for as long as possible.

At the end of the day it is logical to ask the question. If Obamacare is so good for employers, why are they doing everything that they can to avoid its effects? Even if that means paying more in the short run. Go figure.


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