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UPDATE: Affordable Care Act Rates for December Higher Than Estimated. Many Increases are Over 50%

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By: Gregg Kennerly, CHRS

The Affordable Care Act’s impact on Virginia employers so far isn’t “affordable”. Health Plans in the Commonwealth have begun releasing rates for the all-important December contract renewal dates. Over 30,000 Virginia businesses deferred policy anniversary dates until 12/1/2014 in order to delay the effects of the Affordable Care Act (ACA) as long as possible.

Although it was anticipated that rates would rise, the reality appears to be much worse than projected, with increases of between 50% and 125% common. The root cause of these huge increases in health care costs lies in the details of the ACA. New mandated fees, taxes and mandated benefits coupled with new rating regulations which “socialize” health premiums, have combined to create disastrous cost increases for many employer plans. Details of the ACA’s rate impact can be found in this article,”The Coming Disaster”.

No longer able to delay the impact, employers and their broker/consultants are responding with more cost-sharing, reduced benefits, or both. Some employers have elected to simply dissolve their group health plan and offer taxable subsidies to employees for individual plans.

Are health insurers to blame? Probably not. The ACA contains strict regulations which require health insurers to return any excess premiums to policyholders at year end. Insurers are required to pay out 80% to 85% of premiums collected in claims payments. The balance is for risk, administrative costs of paying benefits, issuing policies, compliance, etc.

Political arguments aside, the truth is that the unintended consequences of the ACA are creating unprecedented hardships for Virginia’s employers and their employees. There will be short and long term impacts that are only beginning to be felt, but it is certain that most of the effects are not good for the majority of Virginians.

 

In his career, Gregg has developed specialized expertise in “consumer-driven” and high deductible health plans with HSA and HRA strategies, and sold the first HSA plans issued in Virginia through Assurant Health. He is an expert in analyzing plan design data and has served as account executive for national accounts such as Coca-Cola Enterprises and Tenet HealthCare. Gregg utilizes a strategic approach to establish goals based on each client’s unique culture and competitive environment, and measuring results against jointly established criteria. Gregg Kennerly is a Principal at Advanced Benefit Strategies of Virginia, LLC.
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