As of January 1, 2018 the ACA age band structure will be adjusted to expand the number of single age bands for dependent children in the 0-20 age segment. Additionally, the definition of the 3:1 ratio rule has been adjusted.
This applies to small groups renewing on or after January 1, 2018 with fewer than 100 employees, and larger groups who have chosen to remain on small group contracts. It also applies to individual medical insurance policies purchased on and off the exchange. This does not apply to employers on a large group composite rated contract.
What has changed?
Prior to this change, rates are the same for children age 0-18, with slightly reduced rates for children ages 19-20, and rates increasing at age 21. In January, the age brackets from 0-14 are not affected and will receive reasonable rate changes. The new age band will result in rates increases that are significant for children 15 years and older.
Why is this change being made?
The current rating methodology has caused issues for the insurers and members due to the large jump in premium when a member goes from age 20 to 21. The new rating methodology provided in the final rules updates the child age rating structure to better align with the actual health risk of dependent children under the age of 20 and to provide a more consistent premium scale as members move from age 20 to 21. This new rating methodology creates child rating factors that are higher than the current child rating factors and were designed to reflect health care cost for children more accurately.
What is the impact to employers?
Child rates age 15 and older will experience a 20 to 50 percent rate increase. Groups that have renewed in 2017 will not be impacted until plans renew in 2018. Grandfathered plans are not impacted by these new rates. Employers who do not currently pay for their employees' dependents are not directly impacted but should be aware of those employees that are affected by this change.
As a BDR client, rest assured that we are well aware of this situation. We are working in advance to identify impacted clients and will provide estimated costs and alternative strategies.
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