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Bar News - December 16, 2015


Business Law & Business Litigation: Health Care Reform: An Update for Small Businesses

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The Patient Protection and Affordable Care Act (PPACA) has now been the law of the land for more than five years. However, because of repeated delays or deferrals of key provisions, and continuing tweaks to the law, it is important that employers and the lawyers who advise them continually reassess the implications of the law.

This article briefly discusses some recent PPACA updates of relevance to “small employers” in New Hampshire.

Defining “Small Employer”

PPACA makes distinctions between “small” versus “large” employers when it comes to determining whether certain requirements apply to that coverage (such as including “essential health benefits” and complying with new rating restrictions). Since the inception of the law, the definition of “small” employer for these purposes has been one with 50 or fewer employees.

The original PPACA language would have required that the definition of “small” employer for these purposes be expanded to include employers with up to 100 employees starting in 2016. However, in October the PACE Act was passed, modifying the definition in the law so that it will continue to apply only to those employers with 50 or fewer employees, except where a state elects to expand the definition to 100. New Hampshire recently announced that it would continue to define a “small” employer under the current definition of 50 or fewer.

This change in the law does not affect the definition of an “applicable large employer” for purposes of PPACA’s “employer mandate,” which requires that such employers provide “affordable” coverage or face penalties for failing to do so. An “applicable large employer” remains one who has 50 or more full-time and full-time equivalent employees.

Transitional Relief Set to Expire

Generally speaking, if small employers want to offer health insurance they must offer coverage that complies with the PPACA requirements. PPACA effectively prohibits alternative arrangements that would not satisfy the law’s standards (such as agreements to reimburse employees for the premium costs for their individual coverage).

However, the Centers for Medicare and Medicaid Services issued guidance providing transitional relief to certain health plans, which was subsequently extended. In both instances, the New Hampshire Insurance Department adopted this guidance, and applicable New Hampshire insurance carriers have thus far allowed employers to take advantage of this relief.

Effectively, this guidance provided that certain pre-existing plans could be renewed through Oct. 1, 2016, without complying with PPACA standards. However, by its nature this relief does not apply to employers newly seeking coverage. And even for those employers who fall within this exemption, there has been no indication that the relief will be extended beyond 2016.

Accordingly, it appears in all likelihood that for most employers currently relying on this transitional guidance, their upcoming renewals will be the last to qualify for this relief. For example, an employer renewing on Jan. 1, 2016, will be required to purchase a PPACA-compliant plan on Jan. 1, 2017. If these employers have not already done so, they should begin exploring PPACA-compliant plans with their brokers, as this changeover could potentially result in significant changes in coverage or substantial increases in premiums, or both.

Per-Member Rating and List Billing

As a result of the transitional guidance expiration, many employers are or will be experiencing two key changes in their plan rating for the first time when they move to PPACA-compliant coverage: (1) per-member rating; and (2) “list billing.”

Traditionally, insurers rated small employers based on the age of the subscribers and then produced a composite (or blended) rate for each family composition (e.g., individual, individual and spouse, family). Under the new rules, insurers will rate at the member level (i.e., the subscriber, as well as his or her spouse and dependents) for age (and tobacco use, where applicable). Those rates will then be presented to the employer for each individual subscriber, rather than on a composite basis for all employees. However, employers can still request that these list-billed rates be converted into a composite rate, without accounting for individual ages.

Technically, employers could elect to pass the list-billed rate on to each individual subscriber, resulting in higher premium costs for older workers. But for reasons both practical (e.g., avoiding workplace disruption) and legal (potential discrimination claims), it is likely that the vast majority of employers will maintain the status quo for the time being by charging employees the same composite rate.

Another effect of list billing is that employers may experience greater variation in rates as employees come on and off the plan. Under the old model, the addition of a new employee and the loss of another, both with the same coverage type (e.g., single), would have simply offset each other. But now the age of the old and new employees will result in either an increase or decrease in premium in this example.

New Hampshire Coverage Offerings for 2016

All employers can purchase coverage outside of the health insurance exchanges. However, only small employers meeting certain eligibility criteria can purchase coverage through the Small Business Health Options Program (SHOP) exchange or marketplace. (Beginning in 2017, PPACA authorizes states to elect whether they will allow large employers to participate in the SHOP.)

The SHOP exchange feature allowing employers to offer employees the option to purchase plans from multiple carriers, which was initially delayed, is now available. Small employers that are otherwise eligible for certain PPACA tax credits must also purchase coverage through the SHOP exchange to obtain these credits.

The “employee choice” feature has become more meaningful in New Hampshire with the increase in SHOP competition over the last two years. In 2016, there will be four insurance carriers (Anthem, Community Health Options, Harvard Pilgrim and Minuteman) offering SHOP coverage in each of the four PPACA “metal” levels. In the silver level there will be a total of 13 plans. Open enrollment for SHOP plans is currently underway, and runs until Jan. 31, 2016.

In New Hampshire, the benchmark plan for “essential health benefits” remains the Matthew Thornton Blue plan. (More information: www.cms.gov/cciio/resources/data-resources/ehb.html.) The out-of-pocket maximum for 2016 is $6,850 per individual and $13,700 per family. However, some of the New Hampshire offerings for 2016 have lower out-of-pocket maximums. (View the plans)

Small employers should continue to explore coverage options (both on and off the SHOP exchange), given the expanding number of options in New Hampshire’s small group market. And, in particular, employers relying on the transitional relief to keep their current plan should begin reviewing plan changes in preparation for the switch to PPACA-compliant coverage.


Adam Varley

Adam Varley is a shareholder at Rath, Young and Pignatelli and a member of the firm’s business and finance, financial institutions, and health care practice groups. He focuses his practice on insurance, banking, health care and corporate and business law. For more information, please visit www.rathlaw.com.

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